33-35749
811-4092
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
------
Post-Effective Amendment No. 8 [ X ]
-----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20 [ X ]
FIRST VARIABLE ANNUITY FUND E
(Exempt Name of Registrant)
FIRST VARIABLE LIFE INSURANCE COMPANY
(Name of Depositor)
10 Post Office Square 12th Floor
Boston, MA 02109
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's telephone number including area code: (617) 457-6700
Name and Address of Agent for Service
Arnold R. Bergman
Vice President - Legal and Administration
First Variable Life Insurance Company
10 Post Office Square, 12th Floor
Boston, MA 02109
Copies to:
Lynn K. Stone
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a) (1) of Rule 485
on (date) pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following:
_____ This Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
Registrant has declared that it has registered an indefinite number or amount of
securities in accordance with Rule 24f-2 under the Investment Company Act of
1940. Registrant filed a Rule 24f-2 Notice for its recent fiscal year on or
about February 26, 1996.
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FIRST VARIABLE ANNUITY FUND E
CROSS REFERENCE SHEET
(Pursuant to Rule 495(a))
Item No. in
Form N-4 Location
- -------- --------
PART A
Item 1. Cover Page........................................Cover Page
Item 2. Definitions.......................................Definitions
Item 3. Synopsis or Highlights............................Highlights
Item 4. Condensed Financial Information...................Condensed Finan-
cial Information
Item 5. General Description of Registrant,
Depositors and Portfolio Companies................The Company; The
Separate Account;
Variable Investors
Series Trust;
Federated Insurance
Series
Item 6. Deductions........................................Charges and
Deductions
Item 7. General Description of Variable
Annuity Contracts...............................The Contracts
Item 8. Annuity Period....................................Annuity Provisions
Item 9. Death Benefit.....................................The Contracts,
Annuity Provisions
Item 10 Purchases and Contract Value......................Purchase Payments
and Contract Value
Item 11. Redemptions.......................................Withdrawals
Item 12. Taxes.............................................Tax Status
Item 13. Legal Proceedings.................................Legal Proceedings
Item 14. Table of Contents of Statement of
Additional Information..........................Table of Contents
of Statement of
Additional
Information
2
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Item No. in
Form N-4 Location
- -------- --------
PART B
Item 15. Cover Page ...................................Cover Page
Item 16. Table of Contents ............................Table of Contents
Item 17. General Information and History...............The Company
Item 18. Services......................................Not Applicable
Item 19. Purchase of Securities Being Offered..........Not Applicable
Item 20. Underwriters..................................Distributor
Item 21. Calculation of Performance Data...............Calculation of
Performance Data
Item 22. Annuity Payment ............................Annuity Provisions
Item 23. Financial Statements..........................Financial Statements
PART C
Information required to included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
3
<PAGE>
PART A
4
<PAGE>
FIRST VARIABLE LIFE INSURANCE COMPANY
Marketing and Executive Office: Variable Service Center:
10 Post Office Square, 12th Floor P.O. Box 1317
Boston, MA 02109 Des Moines, IA 50305-1317
(800) 499-0713
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
Funded in
FIRST VARIABLE ANNUITY FUND E
Prospectus
Dated: May, 1, 1996
The Individual Flexible Purchase Payment Deferred Variable and Fixed Annuity
Contracts (the "Contracts") described in this Prospectus are issued by First
Variable Life Insurance Company (the "Company") and provide for accumulation of
Contract Values and payment of monthly annuity payments on a fixed and variable
basis. The Contracts are designed for use by individuals in retirement plans on
a Qualified or Non-Qualified basis. (See "Definitions.")
Purchase Payments for the Contracts may be allocated to the Company's segregated
investment account called First Variable Annuity Fund E (the "Separate Account")
or to the Company's General Account. The Separate Account invests in selected
Portfolios of Variable Investors Series Trust, a mutual fund. The Portfolios
available under a Contract on the date of this Prospectus are: Cash Management
Portfolio, High Income Bond Portfolio, Multiple Strategies Portfolio, Common
Stock Portfolio, U.S. Government Bond Portfolio, Tilt Utility Portfolio, World
Equity Portfolio, Growth & Income Portfolio and Small Cap Portfolio. (See
"Variable Investors Series Trust.")
Subject to regulatory approval, the Company intends to substitute shares of the
Prime Money Fund II of Federated Insurance Series for shares of the Cash
Management Portfolio of Variable Investors Series Trust. After approval is
received, the Prime Money Fund II will be available for allocation of Purchase
Payments or transfers of Contract Value instead of the Cash Management Portfolio
of Variable Investors Series Trust. (See "Proposed Substitution of Cash
Managment Portfolio Shares" and "Federated Insurance Series.")
The Contracts are not deposits or obligations of, or guaranteed or endorsed by,
any financial institution, and the Contracts are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. An investment in the Contract is subject to risk that may cause the
value of the Owner's investment to fluctuate, and when the Contract is
surrendered, the value may be higher or lower than the Purchase Payments.
This Prospectus contains information that an investor should know before
investing. A Statement of Additional Information about the Contracts and the
Separate Accounts, which has the same date as this Prospectus, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The table of contents of the Statement of Additional Information can
be found on page __ of this Prospectus. For a copy of the Statement of
Additional Information, which is available at no cost, write the Company at its
Variable Service Center or call the number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.
5
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TABLE OF CONTENTS
Page
DEFINITIONS.............................................................
HIGHLIGHTS..............................................................
FEE TABLE...............................................................
CONDENSED FINANCIAL INFORMATION.........................................
THE COMPANY.............................................................
THE SEPARATE ACCOUNT....................................................
Variable Investors Series Trust.......................................
Proposed Substitution of Cash Management Portfolio Shares
Federated Insurance Series
Voting Rights.........................................................
Substitution of Other Securities......................................
CHARGES AND DEDUCTIONS..................................................
Deduction for Withdrawal Charge (Sales Load)..........................
Deduction for Mortality and Expense Risk Charge.......................
Deduction for Administrative Charge...................................
Deduction for Annual Contract Maintenance Charge......................
Deduction for Premium Taxes...........................................
Deduction for Income Taxes............................................
Deduction for Expenses of the Investment Options......................
Deduction for Transfer Fee............................................
Elimination or Reduction of Charges and Deductions
THE CONTRACTS...........................................................
Application and Issuance of a Contract
Ownership.............................................................
Annuitant.............................................................
Assignment............................................................
Transfers by the Company..............................................
Beneficiary...........................................................
Change of Beneficiary.................................................
Transfers of Contract Values During the Accumulation Period...........
Telephone Requests
Death of the Annuitant................................................
Death of the Owner....................................................
ANNUITY PROVISIONS......................................................
Annuity Date and Annuity Option.......................................
Change in Annuity Date and Annuity Option.............................
Allocation of Annuity Payments........................................
Transfers During the Annuity Period...................................
Annuity Options.......................................................
Option A. Life Annuity............................................
Option B. Life Annuity with Periods Certain of 60, 120, 180 or
240 Months..............................................
Option C. Joint and Survivor Annuity..............................
Option D. Joint and Contingent Annuity............................
Option E. Fixed Payments for a Period Certain.....................
Frequency and Amount of Annuity Payments..............................
PURCHASE PAYMENTS AND CONTRACT VALUE....................................
Purchase Payments.....................................................
Allocation of Purchase Payments.......................................
Dollar Cost Averaging.................................................
Distribution..........................................................
Contract Value........................................................
Accumulation Unit.....................................................
WITHDRAWALS.............................................................
Systematic Withdrawals................................................
Texas Optional Retirement Program.....................................
Suspension of Payments or Transfers...................................
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PERFORMANCE INFORMATION.................................................
Cash Management Portfolio.............................................
Other Portfolios......................................................
TAX STATUS..............................................................
General...............................................................
Diversification.......................................................
Contracts Owned by Other than Natural Persons
Multiple Contracts....................................................
Tax Treatment of Assignments..........................................
Income Tax Withholding................................................
Tax Treatment of Withdrawals - Non-Qualified Contracts................
Qualified Plans.......................................................
H.R. 10 Plans......................................................
Tax-Sheltered Annuities............................................
Individual Retirement Annuities....................................
Corporate Pension and Profit-Sharing Plans..........................
Section 457 Plans...................................................
Tax Treatment of Withdrawals - Qualified Contracts....................
Tax-Sheltered Annuities - Withdrawal Limitations......................
FINANCIAL STATEMENTS....................................................
LEGAL PROCEEDINGS.......................................................
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION............
-ii-
7
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DEFINITIONS
Account - General Account and/or one or more of the Sub-Accounts of the Separate
Account.
Accumulation Period - The period during which Purchase Payments may be made
prior to the Annuity Date.
Accumulation Unit - A unit of measure used to calculate the Contract Value of a
Sub-Account of the Separate Account prior to the Annuity Date.
Annuitant -The natural person on whose life Annuity Payments are based.
Annuity Date -The date on which Annuity Payments begin.
Annuity Payments -The series of payments made to the Annuitant after the Annuity
Date under the Annuity Option elected.
Annuity Period -The period after the Annuity Date during which Annuity Payments
are made.
Annuity Unit - A unit of measure used to calculate Variable Annuity Payments
after the Annuity Date.
Beneficiary -The person(s) or entity who will receive the death benefit.
Company - First Variable Life Insurance Company.
Contract Anniversary - An anniversary of the Issue Date.
Contract Value - The sum of the Owner's interest in the Sub-Accounts of the
Separate Account and in the General Account.
Contract Year - One year from the Issue Date and from each Contract Anniversary.
Distributor - First Variable Capital Services, Inc., 10 Post Office Square,
12th Floor, Boston, MA 02109.
Fixed Annuity - A series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company.
General Account - The Company's general investment account which contains all
the assets of the Company with the exception of the Separate Account and other
segregated asset accounts.
General Account Value - The Owner's interest in the General Account.
Investment Option - An investment entity which can be selected by the Owner to
be an underlying investment of the Contract.
Issue Date - The date on which the first Contract Year begins.
Non-Qualified Contracts - Contracts issued under Non-Qualified Plans which do
not receive favorable tax treatment under Sections 401, 403(b) 408, or 457 of
the Internal Revenue Code.
Owner - The person, persons or entity entitled to all the ownership rights under
the Contracts and in whose name the Contracts have been issued.
Portfolio - A segment of an Investment Option which constitutes a separate and
distinct class of shares. It is sometimes referred to as a Fund.
Purchase Payment - An amount paid to the Company to provide benefits under the
Contracts.
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Qualified Contracts - Contracts issued under Qualified Plans which receive
favorable tax treatment under Sections 401, 403(b) 408, or 457 of the Internal
Revenue Code.
Separate Account - A separate investment account of the Company, designated as
First Variable Annuity Fund E, into which Purchase Payments or Contract Values
may be allocated.
Sub-Account - A segment of the Separate Account representing an investment in an
Investment Option or a Portfolio of an Investment Option.
Valuation Date - The Separate Account will be valued each day that the New York
Stock Exchange is open for trading which is Monday through Friday, except for
normal business holidays.
Valuation Period - The period beginning at the close of business of the New York
Stock Exchange on each Valuation Date and ending at the close of business for
the next succeeding Valuation Date.
Variable Account Value - The Owner's interest in the Sub-Accounts of the
Separate Account.
Variable Annuity - A series of payments made during the Annuity Period which
vary in amount with the investment experience of each applicable Sub-Account.
Variable Service Center - The company's administrative service center for the
Contracts is located at 1206 Mulberry Street, Des Moines, IA 50309.
Withdrawal Value - The Withdrawal Value is:
1) the Contract Value for the Valuation Period next following
the Valuation Period during which a written request for
withdrawal is received at the Company; less
2) any applicable taxes not previously deducted; less
3) the Withdrawal Charge, if any; less
4) the Annual Contract Maintenance Charge, if any.
HIGHLIGHTS
At the Owner's direction, Purchase Payments for the Contracts will be
allocated to the General Account or to a segregated investment account of First
Variable Life Insurance Company (the "Company") which account has been
designated First Variable Annuity Fund E (the "Separate Account"). On the date
of this Prospectus, the Separate Account invests in Portfolios of the Variable
Investors Series Trust. Subject to regulatory approval, the Separate Account
will substitute shares of the Prime Money Fund II of Federated Insurance Series
instead of the Cash Management Account Portfolio of Variable Investors Series
Trust. (See "Variable Investors Series Trust," "Proposed Substitution of Cash
Managment Portfolio Shares," and "Federated Insurance Series.") Owners bear the
investment risk for all amounts allocated to the Separate Account.
Owners have the right to return a Contract according to the terms of
its "free-look" right. The Company reserves the right to delay initial
investments of Purchase Payments in the Separate Account in certain instances,
but it does not currently do so. (See " The Contracts - Application and Issuance
of a Contract - Free-Look Right" and "Delayed Investment Start Date.")
A Withdrawal Charge (sales load) may be deducted in the event of a
withdrawal of all or a portion of the Contract Value. No Withdrawal Charge will
be assessed upon any withdrawal unless the amount withdrawn exceeds the Free
Withdrawal Amount. The annual Free Withdrawal Amount is determined as the sum of
(a) 10% of Purchase Payments still subject to the Withdrawal Charge; plus (b)
the excess of the Contract Value over Purchase Payments not previously
withdrawn; plus (c) any Purchase Payments no longer subject to the Withdrawal
Charge. The Withdrawal Charge will vary in amount, depending upon the Contract
Year in which the Purchase Payment being surrendered was made. (See "Charges and
Deductions - Deductions for Withdrawal Charge (Sales Load).")
9
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There is a Mortality and Expense Risk Charge which is equal, on an
annual basis, to 1.25% of the average daily net asset value of the Separate
Account. This Charge compensates the Company for assuming the mortality and
expense risks under the Contracts. (See "Charges and Deductions - Deduction for
Mortality and Expense Risk Charge.")
There is an Administrative Charge which is equal, on an annual basis,
to .15% of the average daily net asset value of the Separate Account. This
Charge compensates the Company for costs associated with the administration of
the Contracts and the Separate Account. (See "Charges and Deductions - Deduction
for Administrative Charge.")
There is an Annual Contract Maintenance Charge of $30 each Contract
Year. (See "Charges and Deductions - Deduction for Annual Contract Maintenance
Charge.")
Premium taxes or other taxes payable to a state or other governmental
entity will be charged against the Contract Values. (See "Charges and Deductions
- - Deduction for Premium Taxes.")
Under certain circumstances, a Transfer Fee may be assessed when an
Owner transfers Contract Values from one Sub-Account to another Sub-Account or
to or from the General Account. (See "Charges and Deductions Deduction for
Transfer Fee.")
A ten percent (10%) federal income tax penalty may be applied to the
income portion of any distribution from a Non-Qualified Contract before the
Owner reaches age 59 1/2, with certain exceptions. (See "Tax Status Tax
Treatment of Withdrawals - Non-Qualified Contracts.") Separate tax withdrawal
penalties and restrictions apply to a Qualified Contract. (See "Tax Status - Tax
Treatment of Withdrawals - Qualified Contracts.") Special restrictions apply to
distributions from a 403(b) annuity. (See "Tax Status - Tax-Sheltered Annuities
Withdrawal Limitations.")
For a further discussion of the taxation of a Contract, see "Tax
Status" and "Tax Status Diversification" for a discussion of wner control of
the underlying investments in a variable annuity contract.
Because of certain exemptive and exclusionary provisions, interests in
the General Account are not registered under the Securities Act of 1933 and the
General Account is not registered as an investment company under the Investment
Company Act of 1940, as amended. Accordingly, neither the General Account nor
any interests therein are subject to the provisions of these Acts, and the
Company has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in the Prospectus relating to the
General Account. Disclosures regarding the General Account may, however, be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
FIRST VARIABLE ANNUITY FUND E
FEE TABLE
Owner Transaction Expenses
Withdrawal Charge (see Note 2 below) Contract
(as a percentage of Purchase Payment withdrawn) Anniversaries
Since Purchase
Payment Charge
0 and 1 7%
2 6%
3 5%
4 4%
5 3%
6+ 0%
Transfer Fee (see Note 3 below) No charge for first twelve (12) transfers
in a Contract Year prior to Annuity Date or
for six (6) transfers in a Contract Year
during the Annuity Period. Thereafter, the
fee is the lesser of $25 or 2% of the amount
transferred.
Annual Contract Maintenance Charge............. $30 per Contract per year
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Separate Account Annual Expenses
(as a percentage of average account value)
Mortality and Expense Risk Charge.............. 1.25%
Administrative Charge.......................... .15%
-----
Total Separate Account Annual Expenses......... 1.40%
Variable Investors Series Trust's Annual Expenses
(as a percentage of the average daily net assets of a Portfolio)
<TABLE>
<CAPTION>
High U.S.
Cash Common Income World Multiple Tilt Govt. Growth Small
Management Stock Bond Equity Strat. Utility Bond & Income Cap
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees..... .50% .70% .70% .70% .70% .65% .60% .75% .85%
Other Operating
Expenses........... .25% .47% .50% .50% .50% .50% .25% .50% .50%
--- - --- --- ---- --- ---- ---- ---
(after expense
reimbursement
see Note 5 below)
Total Trust Annual
Expenses........... .75% 1.17% 1.20% 1.20% 1.20% 1.15% .85% 1.25% 1.35%
</TABLE>
Federated Insurance Series Annual Expenses
(as a percentage of the average daily net assets of a Fund)
Prime
Money
Fund II
Management Fees..... .50%
Other Operating
Expenses........... .30%
----
Total Trust Annual
Expenses............ .80%
Examples
An Owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:
a) upon surrender at the end of each time period;
b) if the Contract is not surrendered or is annuitized.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Cash Management Portfolio.............................. a) 117 207 298 550
b) 52 158 267 550
Common Stock Portfolio................................. a) 121 219 318 593
b) 56 171 288 593
High Income Bond Portfolio............................. a) 121 220 320 596
b) 57 171 290 596
1 Year 3 Years 5 Years 10 Years
----- ------- ------- --------
World Equity Portfolio................................. a) 121 220 320 596
b) 57 171 290 596
Multiple Strategies Portfolio.......................... a) 121 220 320 596
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b) 57 171 290 596
Tilt Utility Portfolio................................. a) 121 219 317 591
b) 56 170 287 591
U.S. Government Bond Portfolio......................... a) 118 210 303 561
b) 53 161 272 561
Growth & Income
Portfolio............................................ a) 122 222 322 601
b) 57 173 292 601
Small Cap Portfolio.................................... a) 123 224 327 611
b) 58 176 297 611
Prime Money Fund II a) 117 208 300 555
b) 53 160 269 555
</TABLE>
Explanation of Fee Table and Examples
1. The purpose of the Fee Table is to assist the Owner in understanding the
various costs and expenses that an Owner will incur, directly or indirectly. The
Table reflects expenses of the Separate Account, the Investment Options, and the
Prime Money Fund II which will be available after regulatory approval of a
substitution is received. (See "Proposed Substitution of Cash Management
Portfolio Shares." For additional information, see "Charges and Deductions" in
this Prospectus and the Prospectuses for Variable Investors Series Trust and
Federated Insurance Series.
2. An Owner may make a withdrawal each Contract Year of the Free Withdrawal
Amount or some portion thereof provided that the amount withdrawn is at least
$1,000 or the Owner's entire interest in the Sub-Account, if less. The minimum
Contract Value which must remain in a Sub-Account after a partial withdrawal is
$1,000. Subject to any conditions and fees the Company may impose, an Owner may
elect to have this amount paid in equal periodic installments. The Company
reserves the right to charge a fee for this service. Currently, however, there
are no charges for this service. (See "Charges and Deductions - Deduction for
Withdrawal Charge (Sales Load).)" The 10% free withdrawal has been factored into
the Examples above.
3. No Transfer Fee will be assessed for a transfer made in connection with the
Dollar Cost Averaging program providing for the automatic transfer of funds from
the Cash Management Sub-Account or the General Account to any other
Sub-Account(s). (See "Dollar Cost Averaging.")
4. Prior to April 1, 1994, the Tilt Utility Portfolio was known as the "Equity
Income Portfolio" and had different investment objectives and policies.
5. First Variable Advisory Services Corp. ("Investment Adviser") has agreed
through April 1, 1997 to reimburse Variable Investors Series Trust for all
operating expenses (exclusive of management fees) in excess of .50% of a
Portfolio's average net assets (.25% in the case of the Cash Management
Portfolio and the U.S. Government Bond Portfolio). Had the Investment Adviser
not reimbursed expenses of the Portfolios, for the year ended December 31, 1995,
the Total Trust Annual Expenses were 1.72% for the Cash Management Portfolio;
1.19% for the Common Stock Portfolio; 2.04% for the High Income Bond Portfolio;
1.33% for the Multiple Strategies Portfolio; 1.51% for the Tilt Utility
Portfolio; 1.59% for the U.S. Government Bond Portfolio; and 1.67% for the World
Equity Portfolio.
6. Premium taxes are not reflected. Premium taxes may apply.
7. The assumed initial Purchase Payment is $1,000.
8. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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FIRST VARIABLE ANNUITY FUND E
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES
(for a unit outstanding throughout the period)
The following condensed financial information is derived from the
financial statements of the Separate Account (Policy Forms 7800 and 20224). The
information should be read in conjunction with the financial statements, related
notes and other financial information for the Separate Account included in the
Statement of Additional Information. The financial statements and report of
independent auditors of the Company are also contained in the Statement of
Additional Information.
<TABLE>
<CAPTION>
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C> <C>
Cash Management Sub-Account
Beginning of Period $11.22 $10.97 $10.86 $10.67 $10.24 $10.00
End of Period $11.67 $11.22 $10.97 $10.86 $10.67 $10.24
Number of Accum. Units Outstanding 406,002 123,042 52,908 309,216 207,448 63,260
U.S. Government Bond Sub-Account
Beginning of Period $12.93 $13.48 $12.49 $11.94 $10.56 $10.00
End of Period $15.32 $12.93 $13.48 $12.49 $11.94 $10.56
Number of Accum. Units Outstanding 222,013 207,710 175,294 175,547 494,291 6,523
High Income Bond Sub-Account
Beginning of Period $13.86 $15.12 $13.34 $11.70 $9.34 $10.00
End of Period $16.26 $13.86 $15.12 $13.34 $11.70 $ 9.34
Number of Accum. Units Outstanding 309,472 190,699 437,508 337,571 195,048 536
Multiple Strategies Sub-Account
Beginning of Period $13.28 $14.02 $12.86 $12.59 $10.34 $10.00
End of Period $17.32 $13.28 $14.02 $12.86 $12.59 $10.34
Number of Accum. Units Outstanding 795,702 529,845 167,168 169,897 128,348 11,761
Common Stock Sub-Account
Beginning of Period $12.61 $12.89 $11.98 $13.16 $9.93 $10.00
End of Period $17.05 $12.61 $12.89 $11.98 $13.16 $ 9.93
Number of Accum. Units Outstanding 518,976 242,120 187,792 213,353 157,474 6,736
World Equity Sub-Account
Beginning of Period $11.97 $11.03 $9.54 $9.85 $9.25 $10.00
End of Period $14.67 $11.97 $11.03 $9.54 $9.54 $ 9.25
Number of Accum. Units Outstanding 719,094 349,771 151.437 92,431 72,323 5,125
Tilt Utility Sub-Account *
Beginning of Period $14.70 $15.06 $12.95 $12.99 $10.15 $10.00
End of Period $19.34 $14.70 $15.06 $12.95 $12.99 $10.15
Number of Accum. Units Outstanding 455,859 265,271 211,775 203,350 98,273 6,477
Growth and Income Sub-Account
Beginning of Period (5/31/95) $10.00
End of Period $11.22
Number of Accum. Units Outstanding 289,200
Small Cap Sub-Account
Beginning of Period 5/4/95) $10.00
End of Period $12.931
Number of Accum. Units Outstanding 278,163
</TABLE>
13
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<TABLE>
<CAPTION>
Six
Months
Ended Year Ended Year Ended
6/30/92 12/31/91 12/31/90
<S> <C> <C> <C>
Real Estate Investment Division **
Beginning of Period $11.74 $8.93 $10.00
End of Period $11.58 $11.74 $8.93
Number of Accum. Units Outstanding 0 6,903 904
Natural Resources Division **
Beginning of Period $ 9.19 $9.22 $10.0
End of Period $ 8.81 $9.19 $9.22
Number of Accum. Units Outstanding 0 9,794 1,237
World Bond Division **
Beginning of Period $12.27 $10.91 $10.00
End of Period $12.29 $12.27 $10.91
Number of Accum. Units Outstanding 0 47,602 4,343
Aggressive Growth Division**
Beginning of Period $11.81 $ 9.28 $10.00
End of Period $10.02 $11.81 $ 9.28
Number of Accum. Units Outstanding 0 41,617 3,269
</TABLE>
*On April 1, 1994, the Tilt Utility Portfolio changed its name from the
"Equity Income Portfolio" and changed its investment objectives, policies and
restrictions, and the Tilt Utility Sub-Account changed its name from the "Equity
Income Division."
**On June 29, 1992, the Real Estate Investment, Natural Resources,
Aggressive Growth and World Bond Investment Divisions of Fund E, and the
corresponding Portfolios of the Trust were terminated, based primarily on their
small size and the limited prospect for growth in the foreseeable future.
Investments in these four Investment Divisions were transferred into the
remaining Investment Divisions.
THE COMPANY
First Variable Life Insurance Company (the "Company") is a stock life
insurance company which was organized under the laws of the State of Arkansas in
1968. The Company is principally engaged in the annuity business. The Company is
licensed in 49 states, the District of Columbia and the U.S. Virgin Islands. The
Company is a wholly-owned subsidiary of Irish Life of North America, Inc.
("ILoNA") which in turn is beneficially owned by Irish Life plc ("Irish Life").
ILoNA also owns Interstate Assurance Company ("Interstate") of Des Moines, IA.
Irish Life was formed in 1939 through a consolidation of a number of Irish and
British Life offices transacting business in Ireland. In terms of assets, Irish
Life controls over 50% of the Irish domestic market. As Ireland's leading
institutional investor, it owns in excess of 10% of the leading Irish publicly
traded stocks. Irish Life, through its international subsidiaries, conducts
business in Ireland, the United Kingdom, the United States and France. As of the
end of 1995, the Irish Life consolidated group had in excess of $11billion in
assets. ILoNA is a Delaware corporation, incorporated as Carrig International,
Inc. in 1986, which is the holding company of Interstate and the Company.
The Company has an A- (Excellent) rating from A.M. Best, an independent
firm that analyzes insurance carries. This rating is assigned to companies that
have a strong ability to meet obligations to policyholders over a long period of
time. The Company also has an AA (Double-A) rating from Duff & Phelps Credit
Rating Co. and an AA- (Double A minus) from Standard's and Poors on claims
paying ability. The financial strength of the Company may be relevant with
respect of the Company's ability to satisfy its General Account obligations
under the Contracts.
The Company may publish in advertisements and reports to Owner, the
ratings and other information assigned it by one or more independent rating
services Further the Company may publish charts and other information concerning
dollar cost averaging, tax-deference and other investment methods.
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THE SEPARATE ACCOUNT
The Board of Directors of the Company adopted a resolution to establish
a segregated asset account pursuant to Arkansas insurance law on December 4,
1979. This segregated asset account has been designated First Variable Annuity
Fund E (the "Separate Account"). The Company has caused the Separate Account to
be registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940.
The assets of the Separate Account are the property of the Company.
However, the assets of the Separate Account, equal to the reserves and other
contract liabilities with respect to the Separate Account, are not chargeable
with liabilities arising out of any other business the Company may conduct.
Income, gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Separate Account without regard to
other income, gains or losses of the Company, The Company's obligations arising
under the Contracts are general obligations.
The Separate Account meets the definition of a "separate account" under
the federal securities laws.
The Separate Account is divided into Sub-Accounts. On the date of this
Prospectus, the assets of each Sub-Account are invested in one Portfolio of
Variable Investors Series Trust. (See "Proposed Substitution of Cash Management
Portfolio Shares.") There is no assurance that the investment objective of any
of the Portfolios will be met. Owners bear the complete investment risk for
Purchase Payments allocated to a Sub-Account. Contract Values will fluctuate in
accordance with the investment performance of the Sub-Account(s) to which
Purchase Payments are allocated, and in accordance with the imposition of the
fees and charges assessed under the Contracts.
Variable Investors Series Trust
Variable Investors Series Trust (the "Trust") has been established to
act as one of the funding vehicles for the Contracts offered. The Trust is
managed by First Variable Advisory Services Corp. ("Investment Adviser"), a
wholly-owned subsidiary of the Company. The Investment Adviser retains the
services of sub-advisers pursuant to Sub-Advisory Agreements to manage the
assets of the Portfolios of the Trust as follows: Federated Investment
Counseling with respect to the Cash Management Portfolio and the High Income
Bond Portfolio, Value Line, Inc. with respect to the Multiple Strategies
Portfolio and the Common Stock Portfolio, Strong Capital Management, Inc. with
respect to the U.S. Government Bond Portfolio, State Street Bank and Trust
Company with respect to the Tilt Utility Portfolio, Keystone Investment
Management Company with respect to the World Equity Portfolio, Warburg Pincus
Counsellors, Inc. with respect to the Growth & Income Portfolio and Pilgrim,
Baxter & Associates, Ltd. with respect to the Small Cap Portfolio. Prior to
April 1, 1994, INVESCO Capital Management, Inc. was the investment adviser of
the Trust. The Trust is an open-end management investment company. While a brief
summary of the investment objectives of the Portfolios is set forth below, more
comprehensive information, including a discussion of potential risks, is found
in the current Prospectus for the Trust which is included with this Prospectus.
Purchasers should read this Prospectus and the Prospectus for the Trust
carefully before investing.
The Trust is intended to meet differing investment objectives with its
currently available separate Portfolios: Cash Management Portfolio, High Income
Bond Portfolio, Multiple Strategies Portfolio, Common Stock Portfolio, U.S.
Government Bond Portfolio, Tilt Utility Portfolio, World Equity Portfolio,
Growth & Income Portfolio and Small Cap Portfolio. The investment objectives of
the Portfolios are as follows:
Cash Management Portfolio. The investment objective of this Portfolio is
preservation of capital, maintenance of liquidity and maximum current income
consistent with the foregoing objectives by investing exclusively in a
diversified portfolio of short-term money market instruments. An investment in
the Cash Management Portfolio is neither insured nor guaranteed by the U.S.
Government. Subject to regulatory approval, shares of the Prime Money Fund II of
Federated Insurance Series will be substituted for shares of the Cash Management
Portfolio. Therefore, following the Substitution, the Cash Management Portfolio
will no longer be available for investment. See "Proposed Substitution of Cash
Management Portfolio Shares."
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U.S. Government Bond Portfolio. The investment objective of this Portfolio is
to seek current income and preservation of capital through investment primarily
in securities issued or guaranteed as to principal and interest by the U.S.
Government or by its agencies, authorities, or instrumentalities.
High Income Bond Portfolio. The investment objective of this Portfolio is to
obtain as high a level of current income as is believed to be consistent with
prudent investment management. As a secondary objective, the Portfolio seeks
capital appreciation when consistent with its primary objective. The Portfolio
seeks to achieve its investment objectives by investing primarily in
fixed-income securities rated lower than A. Many of the high yield securities in
which the Portfolio may invest are commonly referred to as "junk bonds." For
special, and significant, risks involved with investing in such securities
(including among others, risk of default and illiquidity) see "Investment
Objectives and Policies of the Portfolios - High Income Bond Portfolio" in the
Trust prospectus.
Tilt Utility Portfolio. The investment objective of this Portfolio is to seek
capital appreciation and current income by investing in a diversified portfolio
of common stock and income securities issued by companies engaged in the
utilities industry ("Utility Securities"). Under normal market conditions, at
least 80% of the Portfolio's assets will be invested in Utility Securities. The
Portfolio is intended to achieve investment returns that are higher than the
Standard & Poor's Utilities Index with equivalent risk, diversification and
price volatility. Prior to April 1, 1994, the Tilt Utility Portfolio was known
as the Equity Income Portfolio and had different investment objectives, policies
and restrictions.
World Equity Portfolio. The investment objective of this Portfolio is to
maximize long-term total return by investing primarily in common stocks, and
securities convertible into common stocks, traded in securities markets located
in countries around the world, including the United States. See "Foreign
Investments" under "Policies and Techniques Applicable to all Portfolios" in the
Trust prospectus for a discussion of the risks involved in investing in foreign
securities.
Common Stock Portfolio. The investment objective of this Portfolio is capital
growth by investing primarily in a diversified portfolio of common stocks and
securities convertible into or exchangeable for common stock. The secondary
objective is current income when consistent with its primary objective.
Multiple Strategies Portfolio. The investment objective of this Portfolio is to
seek as high a level of total return over an extended period of time as is
considered consistent with prudent investment risk by investing in equity
securities, bonds, and money market instruments in varying proportions.
Growth & Income Portfolio. The investment objective of this Portfolio is to
provide growth of capital and income. The Portfolio seeks to achieve its
objectives by investing in equity securities, fixed income securities and money
market instruments. The portion of the Portfolio invested at any given time in
each of these asset classes will vary depending on market conditions, and there
may be extended periods when the Portfolio is primarily invested in one of them.
In addition, the amount of income derived from the Portfolio will fluctuate
depending on the composition of the Portfolio's holdings and will tend to be
lower when a higher portion of the Portfolio is invested in equity securities.
The Portfolio may also purchase without limitation dollar-denominated American
Depository Receipts ("ADRs"). ADRs are issued by domestic banks and evidence
ownership of underlying foreign securities.
Small Cap Portfolio. The investment objective of this Portfolio is to seek
capital appreciation. The Portfolio will invest, under normal conditions, at
least 65% of its total assets in securities of companies with small
capitalizations (market capitalizations or annual revenues under $1 billion at
the time of purchase).
Proposed Substitution of Cash Management Portfolio Shares
On April 15, 1996, the Company filed an application with the Securities and
Exchange Commission ("Commission") requesting an order approving a proposal to
substitute shares (the "Substitution") of the Prime Money Fund II of the
Federated Insurance Series ("Federated Series") for shares of the Cash
Management Portfolio of the Trust. Upon obtaining the order from the Commission
approving the Substitution, and subject to any prior approval by applicable
insurance authorities, the Company and the Separate Account propose to effect
the Substitution as soon as is practicable. Thereafter, the Prime Money Fund II
of the Federated Series will be available for investment by Contract Owners
through the Separate Account, instead of the Cash Management Portfolio of the
Trust.
The Company has proposed the Substitution to provide a transfer of the assets of
the Cash Management Portfolio that currently and in the future may be expected
to be of insufficient size to promote investment performance or to
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reduce operating expenses. An Owner, prior to the date of Substitution, will be
provided with notice and permitted a specified period of at least thirty (30)
days to transfer his or her Cash Management Sub-Account value to any other
Sub-Account without any limitation or charge being imposed.
Federated Insurance Series
Federated Insurance Series is an open-end investment management company that was
formed as a series trust to provide funding options for variable life insurance
and variable annuity contracts. Pursuant to an investment advisory contract with
Federated Series, investment decisions for Federated Series are made by
Federated Advisers, an affiliate of Federated Investment Counseling. Federated
Securities Corp. is the principal distributor for shares of Prime Money Fund II.
Prime Money Fund II. The investment objective of this series is to provide
current income consistent with the stability of principal and liquidity. The
Fund pursues its investment objective by investing exclusively in a portfolio of
money market instruments maturing in 397 days or less. An investment in the
Prime Money Fund II is neither insured nor guaranteed by the U.S. Government.
Investors should read this Prospectus and the prospectus for Federated Series
carefully before investing. Prospectuses for Federated Series may be obtained by
contacting the Variable Service Center.
Additional Portfolios and/or Investment Options may be made available
to Owners.
Voting Rights
In accordance with its view of present applicable law, the Company will
vote the shares of the Trust and Federated Series that are in the Separate
Account at special meetings of the shareholders in accordance with instructions
received from persons having the voting interest in the Separate Account. The
Company will vote shares for which it has not received instructions, as well as
shares attributable to it, in the same proportion as it votes shares for which
it has received instructions. Neither the Trust nor Federated Series holds
regular meetings of shareholders.
Refer to the prospectus of the Trust for further detailed information
on each Portfolio. Shares of the Trust and Federated Series are sold to the
Company for allocation to the Separate Account (Fund E) in connection with the
Contracts, and for allocation to other separate accounts funding other variable
annuity contracts and variable life insurance policies issued, or to be issued,
by the Company. Shares of the Trust and Federated Series may also be sold to
other insurance companies, either affiliated or unaffiliated with the Company,
for the same purpose. It is conceivable that, in the future, it may be
disadvantageous for variable annuity separate accounts and variable life
separate accounts to invest in one or more of the Trust's Portfolios or
Federated Series simultaneously if the interests of variable annuity and
variable life policyholders differ. The Board of Trustees of the Trust and the
Trustees of Federated Series intend to monitor events to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response thereto.
The number of shares which a person has a right to vote will be
determined as of a date to be chosen by the Company not more than sixty (60)
days prior to a shareholder meeting. Voting instructions will be solicited by
written communication at least ten (10) days prior to the meeting.
Substitution of Other Securities
If other shares of the Trust or Federated Series (or any Portfolio
within the Trust or any other Investment Option), are no longer available for
investment by the Separate Account or, if in the judgment of the Company,
further investment in the shares should become inappropriate in view of the
purpose of the Contracts, the Company may substitute shares of another
Investment Option (or Portfolio) for shares already purchased or to be purchased
in the future by Purchase Payments under the Contracts. No substitution of
securities may take place without prior approval of the Securities and Exchange
Commission and under the requirements it may impose.
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CHARGES AND DEDUCTIONS
Various charges and deductions are made from Contract Values and the
Separate Account. These charges and deductions are:
Deduction for Withdrawal Charge (Sales Load)
If all or a portion of the Contract Value is withdrawn, a Withdrawal
Charge (sales load) will be calculated at the time of each withdrawal and will
be deducted from the Contract Value. This Charge reimburses the Company for
expenses incurred in connection with the promotion, sale and distribution of the
Contracts. No Withdrawal Charge will be assessed upon any withdrawal unless the
amount withdrawn exceeds the Free Withdrawal Amount. The annual Free Withdrawal
Amount is determined as the sum of (a) 10% of Purchase Payments still subject to
the Withdrawal Charge; plus (b) the excess of the Contract Value over Purchase
Payments not previously withdrawn; plus (c) any Purchase Payments no longer
subject to the Withdrawal Charge. The Withdrawal Charge is determined by
multiplying the excess of the amount withdrawn over the Free Withdrawal Amount
by the applicable percentage(s) from the Table of Withdrawal Charges below. The
Withdrawal Charge percentages are based upon the number of Contract
Anniversaries, that Purchase Payments have remained in the Contract before being
withdrawn. Purchase Payments are deemed to be withdrawn in the order in which
they are made.
TABLE OF WITHDRAWAL CHARGES:
Contract Anniversaries
Since Purchase Payment Charge
0 and 1 7%
2 6%
3 5%
4 4%
5 3%
6+ 0%
An Owner may make a withdrawal each Contract Year of the Free
Withdrawal Amount provided that the amount withdrawn is at least $1,000 or the
Owner's entire interest in the Sub-Account, if less. The minimum Contract Value
which must remain in a Sub-Account after a partial withdrawal is $1,000.
In the event of the death of the Owner, the Company will waive the
Withdrawal Charge with respect to any death benefits paid.
For a partial withdrawal, the Withdrawal Charge will be deducted from
the remaining Withdrawal Value, if sufficient; otherwise it will be deducted
from the amount withdrawn. The amount deducted from the Contract Value will be
determined by subtracting values from the General Account and/or cancelling
Accumulation Units from each applicable Sub-Account in the ratio that the value
of each Account bears to the total Contract Value. The Owner must specify in
writing in advance which Units are to be cancelled from each Sub-Account and/or
whether values are to be deducted from the General Account if other than the
above method of cancellation is desired.
Waiver of Withdrawal Charge. Subject to state availability, the Company will
waive the Withdrawal Charge:
[bullet] If the Owner or Owner's spouse is first diagnosed with a terminal
illness. The Company may require evidence of such illness, including
an examination by a licensed physician of the Company's choice.
[bullet] After the first Contract Year, if the Owner or the Owner's spouse is
confined for 90 consective days in a qualifying nursing home.
To qualify for a waiver of charges based on confinement in a
qualifying nursing home, the Owner or the Owner's spouse, as the case may be,
must never have been confined in a qualifying nursing home on or before the date
the application for the Contract was signed.
Owners should review their Contracts carefully for a complete description of the
terminal illness and nursing home waiver of charges requirements.
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Deduction for Mortality and Expense Risk Charge
The Company deducts on each Valuation Date, both prior to the Annuity
Date and during the Annuity Period, a Mortality and Expense Risk Charge which is
equal, on an annual basis, to 1.25% of the average daily net asset value of the
Separate Account. The mortality risks assumed by the Company arise from its
contractual obligation to make annuity payments after the Annuity Date for the
life of the Annuitant and to waive the Withdrawal Charge in the event of the
death of the Owner. The Company also bears a mortality risk with respect to the
death benefit. The expense risk assumed by the Company is that all actual
expenses involved in administering the Contracts, including Contract maintenance
costs, administrative costs, mailing costs, data processing costs, legal fees,
accounting fees, filing fees and the costs of other services may exceed the
amount recovered from the Annual Contract Maintenance Charge and the
Administrative Charge.
If the Mortality and Expense Risk Charge is insufficient to cover the
actual costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be a profit to the
Company. The Company expects a profit from this charge. To the extent that the
Witdrawal Charge is insufficient to cover the actual cost of distribution, the
Company may use any of its corporate assets, including potential profit which
may arise from the Mortality and Expense Risk Charge to provide for any
difference.
The Mortality and Expense Risk Charge is guaranteed by the Company and
cannot be increased.
Deduction for Administrative Charge
The Company deducts on each Valuation Date, both prior to the Annuity
Date and during the Annuity Period, an Administrative Charge which is equal, on
an annual basis, to .15% of the average daily net asset value of the Separate
Account. This charge, together with the Annual Contract Maintenance Charge (see
below), is to reimburse the Company for the expenses it incurs in the
establishment and maintenance of the Contracts and the Separate Account. These
expenses include but are not limited to: preparation of the Contracts,
confirmations, annual reports and statements, maintenance of Owner records,
maintenance of Separate Account records, administrative personnel costs, mailing
costs, data processing costs, legal fees, accounting fees, filing fees, the
costs of other services necessary for Owner servicing and all accounting,
valuation, regulatory and reporting requirements. Since this charge is an
asset-based charge, the amount of the charge attributable to a particular
Contract may have no relationship to the administrative costs actually incurred
by that Contract. The Company does not intend to profit from this charge. This
charge will be reduced to the extent that the amount of this charge is in excess
of that necessary to reimburse the Company for its administrative expenses.
Should this charge prove to be insufficient, the Company will not increase this
charge and will incur the loss.
Deduction for Annual Contract Maintenance Charge
The Company deducts an Annual Contract Maintenance Charge of $30 from
the Contract Value on each Contract Anniversary. This charge is to reimburse the
Company for its administrative expenses (see above). This charge is deducted by
subtracting values from the General Account and/or cancelling Accumulation Units
from each applicable Sub-Account in the ratio that the value of each Account
bears to the total Contract Value. When the Contract is withdrawn for its full
Withdrawal Value, on other than the Contract Anniversary, the Annual Contract
Maintenance Charge will be deducted at the time of withdrawal. If the Annuity
Date is not a Contract Anniversary, a pro rata portion of the Annual Contract
Maintenance Charge will be deducted on the Annuity Date. After the Annuity Date,
the Annual Contract Maintenance Charge will be collected on a monthly basis and
will result in a reduction of each Annuity Payment. The Company has set this
charge at a level so that, when considered in conjunction with the
Administrative Charge (see above), it will not make a profit from the charges
assessed for administration.
Deduction for Premium Taxes
Premium taxes or other taxes payable to a state or other governmental
entity will be charged against the Contract Values. The Company currently
intends to deduct premium taxes when incurred. Some states assess premium taxes
at the time Purchase Payments are made; others assess premium taxes at the time
annuity payments begin. Premium taxes generally range from 0% to 4%.
Deduction for Income Taxes
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While the Company is not currently maintaining a provision for federal
income taxes with respect to the Separate Account, the Company has reserved the
right to establish a provision for income taxes if it determines, in its sole
discretion, that it will incur a tax as a result of the operation of the
Separate Account. The Company will deduct for any income taxes incurred by it as
a result of the operation of the Separate Account whether or not there was a
provision for taxes and whether or not it was sufficient. The Company will
deduct any withholding taxes required by applicable law.
Deduction for Expenses of the Investment Options
There are other deductions from and expenses paid out of the assets of
the Investment Options which are described in the accompanying Trust and
Federated Series Prospectuses.
Deduction for Transfer Fee
Prior to the Annuity Date, an Owner may transfer all or part of an
Account without the imposition of any fee or charge if there have been no more
than 12 transfers made in the Contract Year. During the Annuity Period, an Owner
may transfer all or part of an Account without the imposition of any fee or
charge if there have been no more than six (6) transfers made in a Contract
Year. If more than 12 transfers have been made in the Contract Year (or more
than 6 transfers in the Contract Year during the Annuity Period), the Company
will deduct a transfer fee of $25 per transfer or, if less, 2% of the amount
transferred. If the Owner is participating in the Dollar Cost Averaging program
providing for the automatic transfer of funds from the Cash Management
Sub-Account or the General Account to any other Sub-Account(s), such transfers
are not taken into account in determining any transfer fee.
Elimination or Reduction of Charges and Deductions
The charges and deductions on a Contract may be reduced or eliminated, in whole
or in part, when sales of Contracts are made to individuals or to a group of
individuals in a manner that results in savings of sales or administration
expenses. Any reduction will be determined by the Company after examination of
relevant factors such as:
[bullet] the size and type of group to which sales are to be made because
expenses for a larger group are generally less than for a smaller
group since large numbers of Contracts may be implemented and
administered with fewer contacts;
[bullet] the total amount of Purchase Payments to be received because
expenses are likely to be less on larger Purchase Payments than on
smaller ones;
[bullet] any prior or existing relationship with the Company because of the
likelihood of implementing the Contract with fewer contracts; and
[bullet] other circumstances, of which the Company is not presently aware,
which could result in reduced expenses.
Charges may also be eliminated when a Contract is issued to an officer, director
employee or agent of the Company or any of its affiliates. In no event will
reductions or elimination will be unfairly discriminatory to any person.
THE CONTRACTS
Application and Issuance of a Contract
An Application must be completed and submitted to the Company to
purchase a Contract, together with the minimum required initial Purchase
Payment. A Contract ordinarily will be issued with respect to Owners and
Annuitants up to Age 85. Investors in Qualified Contracts for Owners and
Annuitants beyond Age 70 1/2 should consult with qualified tax advisers on the
impact of minimum distribution requirements under their existing retirement
plans. Any required annual minimum distribution amount should be withdrawn from
an existing retirement plan before amounts are transferred to purchase a
Qualified Contract. (See "Tax Status - Tax Treatment of Withdrawals - Qualified
Contracts.")
The Owner, Annuitant, and Beneficiary of a Contract are initially
designated in the application and subject to the Company's underwriting rules.
If the Application for a Contract is in good order, the Company will apply the
Purchase Payment within 2 business days of receipt: (a) to the Separate Account
and credit the Contract with Accumulation Units; and/or (b) to the General
Account and credit the Contract with dollars. If the application for a
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Contract is not in good order, the Company will attempt to get it in good order
or the Company will return the application and the Purchase Payment within 5
business days. The Company will not retain a Purchase Payment for more than 5
business days while processing an incomplete application unless it has been
authorized by the purchaser. The Company may decline any application.
Free Look Right. An Owner has the right to review a Contract during an initial
inspection period specified in the Contract and, if dissatisfied, to return it
to the Company or to the agent through whom it was purchased. When the Contract
is returned to the Company during the permitted period, it will be voided as if
it had never been in force. The Company will ordinarily refund the Contract
Value (which may be greater or less than the Purchase Payments received) on a
Contract returned during the permitted period, unless a different amount is
required. The "free look period" is at least 10 days, and may be greater
depending on state requirements.
Delayed Investment Start Date. Purchase Payments are generally allocated to the
Sub-Accounts or to the General Account as selected by the Owner. In certain
instances, however, the Company reserves the right to allocate Purchase Payments
to the Cash Management Sub-Account (or, after the Substitution, to the Prime
Money Fund II Sub-Account) for a period of up to 5 days beyond a "free look"
inspection period before they will be invested (together with any investment
gain) in any other Sub-Account(s) designated by the Owner. If the Company elects
to delay such initial investments in Sub-Accounts, the delay would apply where a
Contract is issued: (a) in a state which requires that Purchase Payments less
withdrawals be refunded upon the exercise of (i) a "free look" right or (ii) an
inspection right following a "replacement" of an existing life insurance or
annuity contract; or (b) as in Individual Retirement Annuity (or as the initial
investment of an Individual Retirement Account).
On the date of this Prospectus, the Company does not delay investment
start dates and, should it elect to do so, it will so advise prospective
investors in a Contract.
Ownership
The Owner has all rights and may receive all benefits under the
Contract. Prior to the Annuity Date, the Owner is the person designated in the
Application, unless changed. On and after the Annuity Date, the Annuitant is the
Owner. Upon the death of the Annuitant, the Beneficiary is the Owner.
The Owner may change the Owner at any time prior to the Annuity Date. A
change of Owner will automatically revoke any prior designation of Owner. A
request for change must be: (1) made in writing; and (2) received by the Company
at the Variable Service Center. The change will become effective as of the date
the written request is signed. A new designation of Owner will not apply to any
payment made or action taken by the Company prior to the time it was received.
For Non-Qualified Contracts, in accordance with Internal Revenue Code
Section 72(u), a deferred annuity contract held by a corporation or entity that
is not a natural person is not treated as an annuity contract for tax purposes.
Income on the contract is treated as ordinary income received by the Owner
during the taxable year. However, for purposes of Code Section 72 (u), an
annuity contract held by a trust or other entity as agent for a natural person
is considered held by a natural person and treated as an annuity contract for
tax purposes. Tax advice should be sought prior to purchasing a Contract which
is to be owed by a trust or other non-natural person.
Annuitant
The Annuitant is the person on whose life Annuity Payments are based.
The Annuitant is the person designated in the Application, unless changed prior
to the Annuity Date. The Annuitant may not be changed in a Contract which is
owned by a non-natural person.
Assignment
The Owner may, at any time during his or her lifetime, assign his or
her rights under the Contract. The Company will not be bound by any assignment
until written notice is received by the Company. The Company is not
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responsible for the validity of any assignment. The Company will not be liable
as to any payment or other settlement made by the Company before receipt of the
assignment.
If the Contract is issued pursuant to a retirement plan which receives
favorable tax treatment under the provisions of Sections 401, 403(b), 408, or
457 of the Internal Revenue Code, it may not be assigned, pledged or otherwise
transferred except as may be allowed under applicable law.
Transfers by the Company
The Company may, subject to applicable regulatory approvals, transfer
its obligations under the Contracts to another qualified life insurance company
under an assumption reinsurance arrangement without the prior consent of the
Owner.
Beneficiary
The Beneficiary is named in the Application and, unless changed, is
entitled to receive the benefits to be paid at the death of the Owner.
Unless the Owner provides otherwise, the Death Benefit will be paid in
equal shares or all to the survivor(s) as follows:
(1) to the primary Beneficiaries who survive the Owner's death; or if
there are none,
(2) to the contingent Beneficiaries who survive the Owner's death; or
if there are none,
(3) to the estate of the Owner.
Change of Beneficiary
Subject to the rights of any irrevocable Beneficiary(ies), the Owner
may change the primary Beneficiary(ies) or contingent Beneficiary(ies). A change
may be made by filing a written request with the Company at its Variable Service
Center. The change will take effect as of the date the notice is signed. The
Company will not be liable for any payment made or action taken before it
records the change.
Transfers of Contract Values During the Accumulation Period
Prior to the Annuity Date, an Owner may transfer all or part of an
Account without the imposition of any fee or charge if there have been no more
than 12 transfers made in the Contract Year. If more than 12 transfers have been
made in the Contract Year, the Company will deduct a transfer fee. If the Owner
is participating in the Dollar Cost Averaging program providing for the
automatic transfer of funds from the Cash Management Sub-Account or the General
Account to any other Sub-Account(s), such transfers are not taken into account
in determining any transfer fee. All transfers are subject to the following:
(1) the deduction of any transfer fee that may be imposed (no charge
for first 12 transfers in a Contract Year; thereafter, the fee is $25 per
transfer or, if less, 2% of the amount transferred). The transfer fee will be
deducted from the Account from which the transfer is made. However, if the
entire interest in the Account is being transferred, the transfer fee will be
deducted from the amount which is transferred.
(2) The minimum amount which may be transferred is the lesser of (i)
$1,000; or (ii) the Owner's entire interest in the Account, if less. A minimum
Contract Value of $1,000 must remain in the Account after a transfer.
(3) All Purchase Payments and transfers allocated to the General
Account must remain in the General Account for one year prior to any transfer
from the General Account.
(4) Any transfer direction must clearly specify the amount which is to
be transferred and the Accounts which are to be affected.
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(5) The Company reserves the right at any time and without prior notice
to any party including, but not limited to, the circumstances described in the
"Suspension of Payments or Transfers" provision, below, to terminate, suspend or
modify the transfer privileges described above.
Programmed or other frequent requests to transfer all or part of an
Account by, or on behalf of, an Owner may have a detrimental effect on
Investment Option share values held in the Separate Account. The Company may
therefore limit the number of permitted transfers in any Contract Year, or
refuse to honor any transfer request for an Owner or a group of Owners if it is
informed that the purchase or redemption of shares of one or more of the
Investment Options is to be restricted because of excessive trading, or if a
specific transfer or group of transfers is deemed to have a detrimental effect
on Accumulation Unit Value or Investment Option share prices.
The Company may also at any time suspend or cancel its acceptance of
third party authorizations on behalf of an Owner; or restrict the Investment
Options that will be available for such transfers. Notice will be provided to
the third party in advance of the restrictions. The restrictions will not be
imposed, however, if the Company is given satisfactory evidence that : (a) the
third party has been appointed by the Owner to act on the Owner's behalf for all
financial affairs; or (b) the third party has been appointed by a court of
competent jurisdiction to act on the Owner's behalf.
Telephone Requests
An Owner may elect to make transfers by telephone. If there are Joint
Owners, unless the Company is informed to the contrary, instructions will be
accepted from either one of the Joint Owners. The Company will use reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If it does not, the Company may be liable for any losses due to unauthorized or
fraudulent instructions. The Company tape records all telephone instructions.
Death of the Annuitant
Upon the death of the Annuitant prior to the Annuity Date, the Owner
must designate a new Annuitant. If no designation is made within 30 days of the
death of the Annuitant, the Owner will become the Annuitant. However, if the
Owner is a non-natural person, then the death of the Annuitant will be treated
as the death of the Owner and a new Annuitant may not be designated. (See "Death
of the Owner," below.)
Upon the death of the Annuitant after the Annuity Date, the Death
Benefits, if any, will be as specified in the Annuity Option elected.
Death of the Owner
Upon the death of the Owner prior to the Annuity Date, the Death
Benefit will be paid to the Beneficiary designated by the Owner. In certain
states, the Death Benefit will be the greater of:
1. the Purchase Payments, less any withdrawals including any
applicable Withdrawal Charges;
2. the Contract Value; or
3. the Contract Value as of the first day of the current five
Contract Year period plus any Purchase Payments made since that
day and less any amounts withdrawn since that day.
The first five Contract Year period begins on the Issue Date, the
second five Contract Year period begins on the fifth Contract Anniversary, and
so forth. If the Beneficiary is the spouse of the Owner and elects to continue
the Contract, the Contract Value remains unchanged and no determination of the
Death Benefit is made at that time.
In other states, the Death Benefit will be the greater of:
1. the Purchase Payments, less any withdrawals including any
applicable Withdrawal Charges; or
2. the Contract Value.
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Owners should refer to their Contract for the applicable Death Benefit
provision.
The Death Benefit will be determined and paid as of the Valuation
Period next following the date of receipt by the Company of both due proof of
death and an election for the payment method. The Beneficiary can elect to have
a single lump sum payment or choose one of the Annuity Options.
If a single sum payment is requested, the proceeds will be paid within
seven (7) days of receipt of proof of death and the election. Payment under an
Annuity Option may only be elected during the sixty-day period beginning with
the date of receipt of proof of death or a single sum payment will be made to
the Beneficiary at the end of the sixty-day period.
The entire Death Benefit must be paid within five (5) years of the date
of death unless:
1. the Beneficiary elects to have the Death Benefit payable under an
Annuity Option over the life of the Beneficiary or over a period not extending
beyond the life expectancy of the Beneficiary with distribution beginning within
one year of the date of death; or
2. if the Beneficiary is the spouse of the Owner, the Beneficiary may
elect to become the Owner of the Contract and the Contract will continue in
effect.
If there are Joint Owners, any reference to the death of the Owner
shall mean the first death of an Owner.
The Contract can be held by Joint Owners. Any Joint Owner must be the
spouse of the other Owner. Upon the death of either Owner, the surviving spouse
will be the primary Beneficiary. Any other Beneficiary designated in the
Application or as subsequently changed will be treated as a contingent
Beneficiary unless otherwise indicated in writing to the Company.
If the Owner is a non-natural person, then for purposes of the Death
Benefit the Annuitant shall be treated as the Owner and the death of the
Annuitant or a change of the Annuitant shall be treated as the death of the
Owner.
ANNUITY PROVISIONS
Annuity Date and Annuity Option
The Owner selects an Annuity Date and Annuity Option at the time of
application. The Annuity Date must always be the first day of a calendar month
and must be at least one month after the Issue Date. The Annuity Date may not be
later than the Annuitant's 85th birthday. If no Annuity Option is elected,
Option B with a 120 month guarantee will automatically be applied.
Change in Annuity Date and Annuity Option
Prior to the Annuity Date, the Owner may change the Annuity Date. Any
changes must be in writing and must be requested at least seven (7) days prior
to the new Annuity Date. The Annuity Date must always be the first day of a
calendar month and must be at least one month after the Issue Date. The Annuity
Date may not be later than the Annuitant's 85th birthday.
The Owner may, upon written notice to the Company, at any time prior to
the Annuity Date, change the Annuity Option. Any change must be requested at
least seven (7) days prior to the Annuity Date.
Allocation of Annuity Payments
If all of the Contract Value on the seventh calendar day before the
Annuity Date is allocated to the General Account, the Annuity will be paid as a
Fixed Annuity. If all of the Contract Value on that date is allocated to the
Separate Account, the Annuity will be paid as a Variable Annuity. If the
Contract Value on that date is allocated to both the General Account and the
Separate Account, the Annuity will be paid as a combination of a Fixed Annuity
and a Variable Annuity to reflect the allocation between the Accounts.
Transfers During the Annuity Period
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During the Annuity Period, the Owner may transfer, by written request,
Contract Values among the Accounts subject to the following:
1. the deduction of any transfer fee that may be imposed (no charge
for first six (6) transfers per Contract Year made among the Sub-Accounts;
thereafter, the fee is $25 per transfer or, if less, 2% of the amount
transferred).
2. the Owner may, once each Contract Year, make a transfer from one or
more Sub-Accounts to the General Account. The Owner may not make a transfer from
the General Account to the Separate Account. Amounts transferred from a
Sub-Account to the General Account are subject to certain procedures set out in
the Contract.
Annuity Options
The actual dollar amount of Variable Annuity Payments is dependent upon
(i) the Contract Value on the Annuity Date, (ii) the annuity table specified in
the Contract, (iii) the Annuity Option selected, and (iv) the investment
performance of the Sub-Account selected.
The annuity tables contained in the Contract for Variable Annuity
Payments are based on a four percent (4%) assumed investment rate. If the actual
net investment rate exceeds four percent (4%), payments will increase.
Conversely, if the actual rate is less than four percent (4%), Variable Annuity
Payments will decrease. If a higher assumed investment rate was used, the
initial payment would be higher, but the actual net investment rate would have
to be higher in order for Variable Annuity Payments to increase.
Variable Annuity Payments will reflect the investment performance of
the Separate Account in accordance with the allocation of the Contract Value to
the Sub-Account on the Annuity Date. Thereafter, allocations may not be changed
except as provided in "Transfers During the Annuity Period", above. The total
dollar amount of each Annuity Payment is the sum of the Variable Annuity Payment
and the Fixed Annuity Payment reduced by the applicable portion of the Annual
Contract Maintenance Charge.
The amount payable under the Contract may be made under one of the
following options or any other option acceptable to the Company:
Option A. Life Annuity. An annuity payable monthly during the lifetime of the
Annuitant. Payments cease at the death of the Annuitant.
Option B. Life Annuity with Periods Certain of 60, 120, 180 or 240 Months. An
annuity payable monthly during the lifetime of the Annuitant and in any event
for sixty (60), one hundred twenty (120), one hundred eighty (180) or two
hundred forty (240) months certain as selected.
Option C. Joint and Survivor Annuity. An annuity payable monthly during the
joint lifetime of the Annuitant and a designated second person. At the death of
either Payee, Annuity Payments will continue to be made to the survivor Payee.
The survivor's Annuity Payments will be equal to 100%, 75%, 662/3% or 50% of the
amount payable during the joint lifetime, as chosen.
Option D. Joint and Contingent Annuity. An annuity payable monthly during the
lifetime of the Annuitant and continuing during the lifetime of a designated
second person after the Annuitant's death. The second person's annuity payments
will be equal to 100%, 75%, 662/3% or 50% of the amount payable, as chosen.
Option E. Fixed Payments for a Period Certain. An annuity payable monthly for a
fixed amount for any specified period (at least five (5) years but not exceeding
thirty (30) years), as chosen.
Annuity Options A, B, C & D are available on a Fixed Annuity basis, a
Variable Annuity basis or a combination of both. Annuity Option E is available
on a Fixed Annuity basis only.
Frequency and Amount of Annuity Payments
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Annuity Payments will be paid as monthly installments. However, if the
net amount available to apply under any Annuity Option is less than $5,000, the
Company has the right to pay the amount in one single lump sum in lieu of
Annuity Payments. If the Annuity Payment would be or become less than $200 where
only a Fixed Annuity Payment or a Variable Annuity is selected, or if the
Annuity Payment would be or become less than $100 on each basis when a
combination of Fixed and Variable Annuities is selected, the Company will reduce
the frequency of payments to an interval which will result in each payment being
at least $200, or $100 on each basis if a combination of Fixed and Variable
Annuities is selected.
PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments
The Contracts are purchased under a flexible Purchase Payment plan. The
initial Purchase Payment is due on the Issue Date. For Non-Qualified Contracts,
the minimum initial Purchase Payment is $5,000. The minimum initial Purchase
Payment for Qualified Contracts is $1,000. For all Contracts, the maximum
subsequent Purchase Payment is $1,000,000 and the minimum subsequent Purchase
Payment is $100. The Company reserves the right to decline any Application or
Purchase Payment.
Allocation of Purchase Payments
Purchase Payments are allocated to the General Account or appropriate
Sub-Account(s) within the Separate Account as selected by the Owner. Unless
elected otherwise by the Owner, subsequent Purchase Payments are allocated in
the same manner as the initial Purchase Payment. For each Sub-Account, Purchase
Payments are converted into Accumulation Units. The number of Accumulation Units
credited to the Contract is determined by dividing the Purchase Payment
allocated to the Sub-Account by the value of the Accumulation Unit for the
Sub-Account as of the Valuation Period during which the Purchase Payment is
allocated to the Sub-Account. Purchase Payments allocated to the General Account
are credited in dollars.
Under certain circumstances, the Company may delay the initial
investment of Purchase Payments to be allocated to Investment Options in the
Separate Account, but it does not currently do so. (See "The Contracts
Application and Issuance of a Contract -- Delayed Investment Start Date.")
Dollar Cost Averaging
Dollar Cost Averaging is a program which, if elected, permits an Owner to
systematically transfer amounts for each month or quarter from the Cash
Management Sub-Account or the General Account to any Sub-Account(s). By
allocating amounts on a regularly scheduled basis as opposed to allocating the
total amount at one particular time, an Owner may be less susceptible to the
impact of market fluctuations. The minimum amount which may be transferred is
$500. An Owner must have a minimum of $6,000 of Contract Value in the Cash
Management Sub-Account or the General Account, or the amount required to
complete the Owner's designated program, in order to participate in the Dollar
Cost Averaging program. After the Substitution, the Dollar Cost Averaging
requirements applicable to the Cash Management Sub-Account will apply to the
Prime Money Fund II Sub-Account. (See "Proposed Substitution of Cash Management
Portfolio Shares.")
All Dollar Cost Averaging transfers will be made on the same day of
each month or quarter (or the next Valuation Date if the same day of the month
or quarter is not a Valuation Date). If the Owner is participating in the Dollar
Cost Averaging program, such transfers are not taken into account in determining
any transfer fee. Under certain circumstances, there may be restrictions with
respect to an Owner's ability to participate in the Dollar Cost Averaging
program and limitations on the amounts that can be transferred from the General
Account to any Sub-Accounts. An Owner participating in the Dollar Cost Averaging
program may not make systematic withdrawals of his or her Contract Value. (See
"Withdrawals--Systematic Withdrawals.")
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Distribution
First Variable Capital Services, Inc. ("FVCS"), 10 Post Office Square,
12th Floor, Boston, MA 02109 acts as the distributor of the Contracts. FVCS is a
wholly-owned subsidiary of the Company. The Contracts are offered on a
continuous basis through FVCS and approved broker-dealers who are members of the
National Association of Securities Dealers, Inc.
The Company and FVCS have agreements with various broker-dealers under
which the Contracts will be sold by registered representatives of the
broker-dealers. The registered representatives are required to be authorized
under applicable state regulations to sell variable annuity contracts. The
commissions payable to a broker-dealer may vary with the sales agreement, but
are not expected to exceed 7% of Purchase Payments. Broker-dealers may also
receive expense allowances, wholesaler fees, bonuses and training fees.
Contract Value
The Contract Value of the Contract on any Valuation Date is the sum of
the Owner's interest in the Sub-Accounts of the Separate Account and in the
General Account. The value of each Sub-Account is determined by multiplying the
number of Accumulation Units attributable to the Sub-Account by the value of an
Accumulation Unit for the Sub-Account.
Accumulation Unit
Purchase Payments allocated to the Separate Account and amounts
transferred to or within the Separate Account are converted into Accumulation
Units. This is done by dividing each Purchase Payment by the value of an
Accumulation Unit as of the Valuation Period during which the Purchase Payment
is allocated to the Separate Account or the transfer is made. The Accumulation
Unit value for each Sub-Account was arbitrarily set initially at $10. The
Accumulation Unit value for any later Valuation Period is determined by
subtracting (2) from (1) and dividing the result by (3) where:
(1) is the net result of:
(a) the assets of the Sub-Account attributable to Accumulation
Units; plus or minus
(b) the cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the operation
or maintenance of the Sub-Account;
(2) is the cumulative unpaid charge for the Mortality and Expense Risk
Charge and for the Administrative Charge (see "Charges and
Deductions"); and
(3) is the number of Accumulation Units outstanding at the end of such
Valuation Period.
The Accumulation Unit value may increase or decrease from Valuation Period to
Valuation Period.
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WITHDRAWALS
While the Contract is in force and before the Annuity Date, the Company
will, upon written request to the Company by the Owner, allow the withdrawal of
all or a portion of the Contract for its Withdrawal Value. Withdrawals will
result in the cancellation of Accumulation Units from each applicable
Sub-Account of the Separate Account or a reduction in the General Account Value
in the ratio that the Sub-Account Value and/or the General Account Value bears
to the total Contract Value. The Owner must specify in writing in advance which
units are to be cancelled or values are to be reduced if other than the
above-mentioned method of cancellation is desired. The Company will pay the
amount of any withdrawal within seven (7) days of receipt of a request in good
order, unless the "Suspension of Payments or Transfers" provision is in effect.
The Withdrawal Value is the Contract Value for the Valuation Period next
following the Valuation Period during which a written request for withdrawal is
received at the Company reduced by the sum of:
(a) any applicable taxes not previously deducted;
(b) any applicable Annual Contract Maintenance Charge; and
(c) any applicable Withdrawal Charge.
Each partial withdrawal must be for an amount which is not less than
$1,000 or, if smaller, the remaining value in the Sub-Account or General
Account. The remaining value in each Sub-Account or the General Account from
which a partial withdrawal is requested must be at least $1,000 after the
partial withdrawal is completed.
Certain tax withdrawal penalties and restrictions may apply to
withdrawals from Contracts. For Contracts purchased in connection with 403(b)
plans, the Code limits the withdrawal of amounts attributable to contributions
made pursuant to a salary reduction agreement (as defined in Section 403(b)(11)
of the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship.
However, withdrawals for hardship are restricted to the portion of the
Owner's Contract Value which represents contributions made by the Owner and does
not include any investment results. The limitations on withdrawals became
effective on January 1, 1989 and apply only to salary reduction contributions
made after December 31, 1988, to income attributable to such contributions and
to income attributable to amounts held as of December 31, 1988. However, these
limitations will apply to all amounts (regardless of when or how the
contributions were originally made) which are transferred or rolled over from a
custodial account (as defined in Section 403(b)(7) of the Code) into the Owner's
Account. The limitations on withdrawals do not affect rollovers or transfers
between certain Qualified Plans. Owners should consult their own tax counsel or
other tax adviser regarding any distributions.
Systematic Withdrawals
As stated above, an Owner may request a withdrawal of the Contract's
Withdrawal Value. In addition, and subject to any conditions and fees the
Company may impose, an Owner may elect to make equal periodic withdrawals
("systematic withdrawals") of his or her Contract Values. Currently, however,
there are no charges for systematic withdrawals.
Under the program, systematic withdrawals are made on the same day (or
next Valuation Date) of each month or quarter. Owners must be 59 1/2 or older to
participate. Systematic withdrawals are taken pro-rata from the Investment
Options of a Contract and are transferred automatically to an Owner's bank
account, provided the account is maintained at a bank that is a member of the
Automated Clearing House (ACH). the right to a 10% free single sum withdrawal is
forfeited. Systematic withdrawals are not allowed simultaneously with the dollar
cost averaging program.
Texas Optional Retirement Program
A Contract issued to a participant in the Texas Optional Retirement
Program ("ORP") will contain an ORP endorsement that will amend the Contract as
follows: a) If for any reason a second year of ORP participation is not begun,
the total amount of the State of Texas' first-year contribution will be returned
to the appropriate institution of higher education upon its request. b) No
benefits will be payable, through surrender of the Contract or otherwise, until
the participant dies, accepts retirement, terminates employment in all Texas
institutions of higher education or attains the
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age of 70 1/2. The value of the Contract may, however, be transferred to other
contracts or carriers during the period of ORP participation. A participant in
the ORP is required to obtain a certificate of termination from the
participant's employer before the value of a Contract can be withdrawn.
Suspension of Payments or Transfers
The Company reserves the right to suspend or postpone payments for
withdrawals or transfers for any period when:
(1) the New York Stock Exchange is closed (other than customary
weekend and holiday closings);
(2) trading on the New York Stock Exchange is restricted;
(3) an emergency exists as a result of which disposal of securities
held in the Separate Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's net
assets; or
(4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of Owners; provided that
applicable rules and regulations of the Securities and Exchange Commission will
govern as to whether the conditions described in (2) and (3) exist.
The Company reserves the right to defer payment for a withdrawal or
transfer from the General Account for the period permitted by law but not for
more than six months after written election is received by the Company.
PERFORMANCE INFORMATION
Cash Management Portfolio
From time to time, the Cash Management Sub-Account of the Separate
Account may advertise its "yield" and "effective yield." Both yield figures are
based on historical earnings and are not intended to indicate future
performance. The "yield" of the Cash Management Sub-Account refers to the income
generated by Contract Values in the Cash Management Sub-Account over a seven-day
period (which period will be stated in the advertisement). This income is
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the Contract Values in the Cash Management Sub-Account.
The "effective yield" is calculated similarly. However, when annualized, the
income earned by Contract Values is assumed to be reinvested. This results in
the "effective yield" being slightly higher than the "yield" because of the
compounding effect of the assumed reinvestment. The yield figure will reflect
the deduction of any asset-based charges and any applicable Annual Contract
Maintenance Charge, but will not reflect the deduction of any Withdrawal Charge.
The deduction of any Withdrawal Charge would reduce any percentage increase or
make greater any percentage decrease. The "yield" and the "effective yield" of
the Prime Money Fund II Sub-Account may be advertised after the Substitution.
(See "Proposed Substitution of Cash Management Portfolio Shares.")
Other Portfolios
From time to time, the Company may advertise performance data for the
various other Portfolios under the Contract. Such data will show the percentage
change in the value of an Accumulation Unit based on the performance of an
investment medium over a period of time, usually a calendar year, determined by
dividing the increase (decrease) in value for that Unit by the Accumulation Unit
value at the beginning of the period. This percentage figure will reflect the
deduction of any asset-based charges and any applicable Annual Contract
Maintenance Charges under the Contracts, but will not reflect the deduction of
any Withdrawal Charge. The deduction of any Withdrawal Charge would reduce any
percentage increase or make greater any percentage decrease.
Any advertisement will also include total return figures calculated as
described in the Statement of Additional Information. The total return figures
reflect the deduction of any applicable Annual Contract Maintenance Charges and
Withdrawal Charges, as well as any asset-based charges.
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The Company may make available yield information with respect to some
of the Portfolios. Such yield information will be calculated as described in the
Statement of Additional Information. The yield information will reflect the
deduction of any applicable Annual Contract Maintenance Charge as well as any
asset-based charges.
The Company may also show historical Accumulation Unit values in
certain advertisements containing illustrations. These illustrations will be
based on actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares
the percentage change in Accumulation Unit values for any of the Portfolios
against established market indices such as the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average or other management
investment companies which have investment objectives similar to the Portfolio
being compared. The Standard & Poor's Composite 500 Stock Price Index is an
unmanaged, unweighted average of 500 stocks, the majority of which are listed on
the New York Stock Exchange. The Dow Jones Industrial Average is an unmanaged,
weighted average of thirty blue chip industrial corporations listed on the New
York Stock Exchange. Both the Standard & Poor's 500 Stock Index and the Dow
Jones Industrial Average assume quarterly reinvestment of dividends.
The Company may also distribute sales literature which compares the
performance of the Accumulation Unit values of the Contracts issued through the
Separate Account with the unit values of variable annuities issued through the
separate accounts of other insurance companies. Such information will be derived
from the Lipper Variable Insurance Products Performance Analysis Service,
Morningstar or from the VARDS Report.
The Lipper Variable Insurance Products Performance Analysis Service is
published by Lipper Analytical Services, Inc., a publisher of statistical data
which currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis
compiled by Variable Annuity Research & Data Service of Miami and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges.
Morningstar rates a variable annuity sub-account against its peers with
similar investment objectives. Morningstar does not rate any sub-account that
has less than three years of performance data.
TAX STATUS
General
NOTE: The following description is based upon the Company's
understanding of current federal income tax law applicable to annuities in
general. The Company cannot predict the probability that any changes in such
laws will be made. Purchasers are cautioned to seek competent tax advice
regarding the possibility of such changes. The Company does not guarantee the
tax status of the Contracts. Purchasers bear the complete risk that the
Contracts may not be treated as "annuity contracts" under federal income tax
laws. It should be further understood that the following discussion is not
exhaustive and that special rules not described in this Prospectus may be
applicable in certain situations. Moreover, no attempt has been made to consider
any applicable state or other tax laws.
Section 72 of the Code governs taxation of annuities in general. An
Owner is not taxed on increases in the value of a Contract until distribution
occurs, either in the form of a lump sum payment or as annuity payments under
the Annuity Option selected. For a lump sum payment received as a total
withdrawal (total surrender), the recipient is taxed on the portion of the
payment that exceeds the cost basis of the Contract. For Non-Qualified
Contracts, this cost basis is generally the Purchase Payments, while for
Qualified Contracts there may be no cost basis. The taxable portion of the lump
sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an
exclusion amount is includible in taxable income. The exclusion amount for
payments based on a fixed annuity option is determined by multiplying the
payment
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by the ratio that the cost basis of the Contract (adjusted for any
period certain or refund feature) bears to the expected return under the
Contract. The exclusion amount for payments based on a variable annuity option
is determined by dividing the cost basis of the Contract (adjusted for any
period certain or refund guarantee) by the number of years over which the
annuity is expected to be paid. Payments received after the investment in the
Contract has been recovered (i.e. when the total of the excludable amounts
equals the investment in the Contract) are fully taxable. The taxable portion is
taxed at ordinary income tax rates. For certain types of Qualified Plans there
may be no cost basis in the Contract within the meaning of Section 72 of the
Code. Owners, Annuitants and Beneficiaries under the Contracts should seek
competent financial advice about the tax consequences of any distributions.
The Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the Separate Account is not a separate entity from
the Company and its operations form a part of the Company.
Diversification
Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in imposition of federal income tax
to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract.
The Company intends that all Portfolios of the Trust underlying the
Contracts will be managed by the Investment Adviser for the Trust, and that
Prime Money Fund II will be managed by its investment adviser, to comply
with the diversification requirements set forth in section 817(h) of the Code
and Treas. Reg. 1-817-5 promulgated thereunder.
The Treasury Department has indicated that the diversification
Regulations do not provide guidance regarding the circumstances in which Owner
control of the investments of the Separate Account will cause the Owner to be
treated as the owner of the assets of the Separate Account, thereby resulting in
the loss of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Owner control which may be exercised under the Contract
is different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered the owner of the assets of the Separate Account
resulting in the imposition of federal income tax to the Owner with respect to
earnings allocable to the Contract prior to receipt of payments under the
Contract.
In the event any forthcoming guidance or ruling is considered to set
forth a new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owners
being retroactively determined to be the owners of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to
modify the Contract in an attempt to maintain favorable tax treatment.
Contracts Owned by Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the owner is a non-natural
person, e.g., a corporation, or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to Contracts held by a trust or other entity as an
agent for a natural person or to Contracts held by a tax-qualified retirement
plan described in
31
<PAGE>
sections 401,403(a), 403(b), 408, or 457 of the Code.
Purchasers should consult their own tax counsel or other tax adviser before
purchasing a Contract to be owned by a non-natural person.
Multiple Contracts
The Code provides that multiple non-qualified annuity contracts which
are issued within a calendar year to the same contract owner by one company or
its affiliates are treated as one annuity contract for purposes of determining
the tax consequences of any distribution. Such treatment may result in adverse
tax consequences including more rapid taxation of the distributed amounts from
such combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
Tax Treatment of Assignments
An assignment or pledge of a Contract may be a taxable event. Owners
should therefore consult competent tax advisers should they wish to assign or
pledge their Contracts.
Income Tax Withholding
All distributions or the portion thereof which is includible in the
gross income of the Owner are subject to federal income tax withholding.
Generally, amounts are withheld from periodic payments at the same rate as wages
and at the rate of 10% from non- periodic payments. However, the Owner, in most
cases, may elect not to have taxes withheld or to have withholding done at a
different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a mandatory
20% withholding for federal income tax. The 20% withholding requirement
generally does not apply to: (a) a series of substantially equal payments made
at least annually for the life or life expectancy of the participant or joint
and last survivor expectancy of the participant and a designated beneficiary, or
distributions for a specified period of 10 years or more; or (b) distributions
which are required minimum distributions; or (c) the portion of the
distributions not includible in gross income (i.e. return of after-tax
contributions). participants should consult their own tax counsel or other tax
adviser regarding withholding requirements.
Tax Treatment of Withdrawals--Non-Qualified Contracts
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any distribution. However, the penalty is not imposed on amounts received: (a)
after the taxpayer reaches age 59 1/2; (b) after the death of the Owner; (c) if
the taxpayer is totally disabled (for this purpose disability is as defined in
Section 72(m)(7) of the Code); (d) in a series of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the taxpayer or for the joint lives (or joint life expectancies)
of the taxpayer and his or her Beneficiary; (e) under an immediate annuity; or
(f) which are allocable to purchase payments made prior to August 14, 1982.
The above information does not apply to Qualified Contracts. However,
separate tax withdrawal penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals- Qualified Contracts", below.)
32
<PAGE>
Qualified Plans
The Contracts offered by this Prospectus are designed to be suitable
for use under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits
under a Qualified Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of the Contracts issued pursuant to the
plan. Some retirement plans are subject to distribution and other requirements
that are not incorporated into the Company's administrative procedures. Contract
Owners, participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the Contract
comply with applicable law. Following are general descriptions of the types of
Qualified Plans with which the Contracts may be used. Such descriptions are not
exhaustive and are for general informational purposes only. The tax rules
regarding Qualified Plans are very complex and will have differing applications
depending on individual facts and circumstances. Each purchaser should obtain
competent tax advice prior to purchasing a Contract issued under a Qualified
Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described in
this Prospectus. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts", below.)
On July 6, 1983, the Supreme Court decided in Arizona Governing
Committee v. Norris that optional annuity benefits provided under an employer's
deferred compensation plan could not, under Title VII of the Civil Rights Act of
1964, vary between men and women. The Contracts sold by the Company in
connection with Qualified Plans will utilize annuity tables which do not
differentiate on the basis of sex. Such annuity tables will also be available
for use in connection with certain non-qualified deferred compensation plans.
H.R. 10 Plans. Section 401 of the Code permits self-employed individuals to
establish Qualified Plans for themselves and their employees, commonly referred
to as "H.R. 10" or "Keogh" plans. Contributions made to the Plan for the benefit
of the employees will not be included in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places limitations
and restrictions on all Plans including on such items as: amount of allowable
contributions; form, manner and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. (See "Tax Treatment of Withdrawals--Qualified
Contracts" below.) Purchasers of Contracts for use with an H.R. 10 Plan should
obtain competent tax advice as to the tax treatment and suitability of such an
investment.
Tax-Sheltered Annuities. Section 403(b) of the Code permits the purchase of
"tax-sheltered annuities" by public schools and certain charitable, educational
and scientific organizations described in Section 501(c)(3) of the Code. These
qualifying employers may make contributions to the Contracts for the benefit of
their employees. Such contributions are not includible in the gross income of
the employees until the employees receive distributions from the Contracts. The
amount of contributions to the tax-sheltered annuity is limited to certain
maximums imposed by the Code. Furthermore, the Code sets forth additional
restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals--Qualified
Contracts" and "Tax Sheltered Annuities--Withdrawal Limitations" below.) Any
employee should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
Individual Retirement Annuities. Section 408(b) of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" ("IRA"). Under applicable limitations, certain
amounts may be contributed to an IRA which will be deductible from the
individual's gross income. These IRAs are subject to limitations on eligibility,
contributions, transferability and distributions. (See "Tax Treatment of
Withdrawals - Qualified Contracts" below.) Under certain conditions,
distributions from other IRAs and other Qualified Plans may be rolled over or
transferred on a tax-deferred basis into an IRA. Sales of Contracts for use with
IRAs are subject to special requirements imposed by the Code, including the
requirement that certain informational disclosure be given to persons desiring
to establish an IRA. Purchasers of Contracts to be qualified as Individual
Retirement Annuities should obtain competent tax advice as to the tax treatment
and suitability of such an investment.
Corporate Pension and Profit-Sharing Plans. Sections 401(a) and 401(k) of the
Code permit corporate employers to establish various types of retirement plans
for employees. These retirement plans may permit the purchase of the
33
<PAGE>
Contracts to provide benefits under the Plan. Contributions to the Plan for the
benefit of employees will not be includible in the gross income of the employees
until distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places limitations
and restrictions on all plans including on such items as: amount of allowable
contributions; form, manner and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. (See "Tax Treatment of Withdrawals - Qualified
Contracts" below.) Purchasers of Contracts for use with Corporate Pension or
Profit-Sharing Plans should obtain competent tax advice as to the tax treatment
and suitability of such an investment.
Section 457 Plans. Under Section 457 of the Code, governmental and certain other
tax-exempt employers may establish deferred compensation plans for the benefit
of their employees which may invest in annuity contracts. The Code, as in the
case of Qualified Plans, establishes limitations and restrictions on
eligibility, contributions and distributions. Under these Plans, contributions
made for the benefit of the employees will not be includible in the employee's
gross income until distributed from the Plan. However, under a Section 457 Plan,
all the assets remain solely the property of the employer subject only to the
claims of the employer's general creditors until such time as made available to
the participant or beneficiary.
Tax Treatment of Withdrawals--Qualified Contracts
In the case of a withdrawal under a Qualified Contract, a ratable
portion of the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including Contracts issued and qualified under Code Sections 401 (H.R. 10 and
Corporate Pension and Profit-Sharing Plans), 403(b) (Tax-Sheltered Annuities)
and 408(b) (Individual Retirement Annuities). To the extent amounts are not
includible in gross income because they have been rolled over to an IRA or to
another eligible Qualified Plan, no tax penalty will be imposed. The tax penalty
will not apply to the following distributions: (a) if distribution is made on or
after the date on which the Owner or Annuitant (as applicable) reaches age
59 1/2; (b) distributions following the death or disability of the Owner or
Annuitant (as applicable) (for this purpose disability is as defined in Section
72(m)(7) of the Code); (c) after separation from service, distributions that are
part of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the Owner or Annuitant (as
applicable) or the joint lives (or joint life expectancies) of such Owner or
Annuitant (as applicable) and his or her designated Beneficiary; (d)
distributions to an Owner or Annuitant (as applicable) who has separated from
service after he has attained age 55; (e) distributions made to the Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the Owner or Annuitant
(as applicable) for amounts paid during the taxable year for medical care; and
(f) distributions made to an alternate payee pursuant to a qualified domestic
relations order. The exceptions stated in (d), (e) and (f) above do not apply in
the case of an Individual Retirement Annuity. The exception stated in (c) above
applies to an Individual Retirement Annuity without the requirement that there
be a separation from service.
Generally, distributions from a qualified plan must commence no later
than April 1 of the calendar year, following the year in which the employee
attains age 70 1/2. Required distributions must be over a period not exceeding
the life expectancy of the individual or the joint lives or life expectancies of
the individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed. In addition, distributions in excess of $150,000 per year may be
subject to an additional 15% excise tax unless an exemption applies.
Tax-Sheltered Annuities--Withdrawal Limitations
The Code limits the withdrawal of amounts attributable to contributions
made pursuant to a salary reduction agreement (as defined in Section 403(b)(11)
of the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers or transfer between certain Qualified Plans. Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
34
<PAGE>
FINANCIAL STATEMENTS
Financial statements of the Company and the Separate Account have been
included in the Statement of Additional Information.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Separate
Account, the Distributor or the Company is a party.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Item Page
<S> <C>
Company.................................................................................................. 3
Independent Auditors..................................................................................... 3
Legal Opinions........................................................................................... 3
Distributor
Service Provider......................................................................................... 3
Yield Calculation for Cash Management Sub-Account........................................................ 3
Performance Information.................................................................................. 4
Annuity Provisions....................................................................................... 5
Variable Annuity....................................................................................... 5
Fixed Annuity.......................................................................................... 6
Annuity Unit........................................................................................... 6
Mortality and Expense Guarantee........................................................................ 6
Financial Statements..................................................................................... 6
</TABLE>
35
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED
VARIABLE AND FIXED ANNUITY CONTRACTS
issued by
FIRST VARIABLE ANNUITY FUND E
and
FIRST VARIABLE LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1996 FOR THE INDIVIDUAL
FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE AND FIXED ANNUITY CONTRACTS WHICH
ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT 10 Post Office Square, Boston, Massachusetts 02109, (800) 228-1035.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 1996
37
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Company...................................................................................................3
Independent Auditors......................................................................................3
Legal Opinions............................................................................................3
Distributor...............................................................................................3
Service Provider..........................................................................................3
Yield Calculation For Cash Management Sub-Account.........................................................3
Performance Information...................................................................................4
Annuity Provisions........................................................................................5
Variable Annuity..........................................................................................5
Fixed Annuity.............................................................................................6
Annuity Unit..............................................................................................6
Mortality and Expense Guarantee...........................................................................6
Financial Statements......................................................................................6
</TABLE>
38
<PAGE>
COMPANY
Information regarding the Company and its ownership is contained in the
Prospectus.
INDEPENDENT AUDITORS
The Company's independent auditor is Ernst & Young LLP, 200 Clarendon Street,
Boston, Massachusetts 02116. The financial statements for the Company as of
December 31, 1995 and 1994 for the years then ended and the financial statements
for First Variable Annuity Fund E as of December 31, 1995 and for the periods
indicated included in this Statement of Additional Information, which is
incorporated by reference into the Prospectus, have been so included in reliance
on the report of Ernst & Young LLP, independent auditors, given on the authority
of said firm as experts in auditing and accounting.
LEGAL OPINIONS
Legal matters in connection with the Contracts described herein are being passed
upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
DISTRIBUTOR
First Variable Capital Services, Inc. ("FVCS") acts as the distributor. FVCS is
a wholly-owned subsidiary of the Company. The offering is on a continuous basis.
SERVICE PROVIDER
The Company has retained Alliance-One Services, L.P. ("Alliance"),
successor corporation to Vantage Computer Systems, Inc., 310 West 11th St.,
Kansas City, Missouri to provide administrative services on certain previously
issued variable annuity contracts funded through First Variable Annuity Fund E..
Such administrative services include maintenance of Owner's records. The Company
will pay all fees and charges of Alliance. Alliance serves as the administrator
to various insurance companies offering variable and fixed annuity and variable
life insurance contracts. The Company administers other contracts it issues,
including the Contracts described in the Prospectus, through the Variable
Service Center described therein.
YIELD CALCULATION FOR CASH MANAGEMENT SUB-ACCOUNT
The Cash Management Sub-Account of the Separate Account will calculate its
current yield based upon the seven days ended on the date calculation. For the
seven calendar days ended December 31, 1995, the annualized yield for the Cash
Management Sub-Account was 5.37%.
The current yield of the Cash Management Sub-Account is computed by determining
the net change (exclusive of capital changes) in the value of a hypothetical
pre-existing Owner account having a balance of one Accumulation Unit of the
Sub-Account at the beginning of the period, subtracting the Mortality and
Expense Risk Charge, the Administrative Charge and the Annual Contract
Maintenance Charge, dividing the difference by the value of the account at the
beginning of the same period to obtain the base period return and multiplying
the result by (365/7).
The Cash Management Sub-Account computes its effective compound yield according
to the method prescribed by the Securities and Exchange Commission. The
effective yield reflects the reinvestment of net income earned daily on Cash
Management Sub-Account assets.
Net investment income for yield quotation purposes will not include either
realized capital gains and losses or unrealized appreciation and depreciation,
whether reinvested or not.
The yields quoted should not be considered a representation of the yield of the
Cash Management Sub-Account in the future since the yield is not fixed. Actual
yields will depend not only on the type, quality and maturities of the
39
<PAGE>
investments held by the Cash Management Sub-Account and changes in the interest
rates on such investments, but also on changes in the Cash Management
Sub-Account's expenses during the period.
Yield information may be useful in reviewing the performance of the Cash
Management Sub-Account and for providing a basis for comparison with other
investment alternatives. However, the Cash Management Sub-Account's yield
fluctuates, unlike bank deposits or other investments which typically pay a
fixed yield for a stated period of time.
PERFORMANCE INFORMATION
From time to time, the Company may advertise performance data as described in
the Prospectus. Any such advertisement will include total return figures for the
time periods indicated in the advertisement. Such total return figures will
reflect the deductions of a 1.25% Mortality and Expense Risk Charge, a .25%
Administrative Charge, the investment advisory fee for the underlying Portfolio
being advertised and any applicable Annual Contract Maintenance Charges.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Annual Contract Maintenance Charges to arrive at the ending hypothetical value.
The average annual total return is then determined by computing the fixed
interest rate that a $1,000 purchase payment would have to earn annually,
compounded annually, to grow to the hypothetical value at the end of time
periods described. The formula used in these calculations is:
[P(1+T) to the power of n] = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5, or 10 year periods at the end of
the 1, 5, or 10 year periods (or fractional portion therof).
The annualized total returns as of December 31, 1995 and for 5 years and for the
life of the Portfolio in each Sub-Account are listed below:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE OF PORTFOLIO
------ ------ -----------------
<S> <C> <C> <C>
Common Stock (inception 6/16/88) 25.922% 9.406% 8.524%
Multiple Strategies (inception 5/5/87) 21.104% 8.803% 8.868%
High Income (inception 6/1/87) 8.03% 9.728% 7.471%
Tilt Utility (inception 6/16/88) 22.301% 11.903% 11.313%
US Govt (inception 5/27/87) 9.214% 5.409% 6.175%
World Equity (inception 6/10/88) 13.295% 7.604% 5.237%
Growth & Income (inception 5/31/95) 5.017%
Small Cap (inception 5/4/95) 36.958%
</TABLE>
The Company may also advertise non-standardized performance information which
does not include all charges.
In addition to total return data, the Company may include yield information in
its advertisements. For each Sub-Account (other than the Cash Management
Sub-Account) for which the Company will advertise yield, it will show a yield
quotation based on a 30 day (or one month) period ended on the date of the most
recent balance sheet of the Separate Account included in the registration
statement, computed by dividing the net investment income per Accumulation Unit
earned during the period by the maximum offering price per Unit on the last day
of the period, according to the following formula:
Yield = 2[(a-b + 1) to the sixth power -1]
---
cd
40
<PAGE>
Where:
a = Net investment income earned during the period by the Trust
attributable to shares owned by the Sub-Account.
b = Expenses accrued for the period (net of reimbursements).
c = The average daily number of Accumulation Units outstanding
during the period.
d = The maximum offering price per Accumulation Unit on the last
day of the period.
The US Government Bond Sub-Account of the Separate Account yield for the
period ended December 31, 1995 was 5.6512%
The High Income Bond Sub-Account of the Separate Account yield for the period
ended December 31, 1995 was 9.6146%
Owners should note that the investment results of each Sub-Account will
fluctuate over time, and any presentation of the Sub-Account's total return or
yield for any period should not be considered as a representation of what an
investment may earn or what an Owner's total return or yield may be in any
future period.
ANNUITY PROVISIONS
Variable Annuity
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount: and (2) will vary in amount with the net investment results
of the applicable Sub-Account(s) of the Separate Account. At the Annuity Date,
the Contract Value in each Sub-Account will be applied to the applicable Annuity
Tables. The Annuity Table used will depend upon the Annuity Option chosen. If,
as of the Annuity Date, the then current Annuity Option rates applicable to this
class of Contracts provide a first Annuity Payment greater than guaranteed under
the same Annuity Option under this Contract, the greater payment will be made.
The dollar amount of Annuity Payments after the first is determined as follows:
(1) the dollar amount of the first Annuity Payment is divided by the value of an
Annuity Unit as of the Annuity Date. This establishes the number of Annuity
Units for each monthly payment. The number of Annuity Units remains fixed during
the Annuity Payment period.
(2) the fixed number of Annuity Units is multiplied by the Annuity Unit value
for the last Valuation Period of the month proceeding the month for which the
payment is due. This result is the dollar amount of the payment.
The total dollar amount of each Variable Annuity Payment is the sum of all
Sub-Account Variable Annuity Payments reduced by the applicable portion of the
Annual Contract Maintenance Charge.
Fixed Annuity
A fixed annuity is a series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Separate Account. The General Account Value on the
day immediately preceding the Annuity Date will be used to determine the Fixed
Annuity monthly payment. The first monthly Annuity Payment will be based upon
the Annuity Option elected and the appropriate Annuity Option Table.
Annuity Unit
The value of an Annuity Unit for each Sub-Account was arbitrarily set initially
at $10.
41
<PAGE>
The Sub-Account Annuity Unit Value at the end of any subsequent Valuation Period
is determined by subtracting (2) from (1) and dividing the result by (3) and
multiplying the result by a factor which neutralizes the assumed investment rate
of 4% contained in the Annuity Tables where:
1. is the net result of:
a. the assets of the Sub-Account attributable to the Annuity Units; plus or
minus
b. the cumulative charge or credit for taxes reserved which is determined by
the Company to have resulted from the operation or maintenance of the Sub-
Account;
2. is the cumulative unpaid charge for the Mortality and Expense Risk Charge
and for the Administrative Charge.
3. is the number of Annuity Units outstanding at the end of the Valuation
Period.
The value of an Annuity Unit may increase or decrease from Valuation Period to
Valuation Period.
Mortality and Expense Guarantee
The Company guarantees that the dollar amount of each Annuity Payment after the
first Annuity Payment will not be affected by variations in mortality or expense
experience.
FINANCIAL STATEMENTS
The financial statements of the Company included herein should be considered
only as bearing upon the ability of the Company to meet its obligations under
the Contracts.
42
<PAGE>
First Variable Life Insurance Company
First Variable Annuity Fund E
Financial Statements
December 31, 1995
Contents
Report of Independent Auditors.......................................
Financial Statements
Statement of Assets, Liabilities and Contract Owners' Equity.........
Statement of Operations..............................................
Statements of Changes in Net Assets..................................
Notes to Financial Statements........................................
43
<PAGE>
Report of Independent Auditors
To the Board of Directors of First Variable Life Insurance Company
and Contract Owners of First Variable Annuity Fund E
We have audited the accompanying statement of assets, liabilities and contract
owners' equity of First Variable Life Insurance Company--First Variable Annuity
Fund E as of December 31, 1995, and the related statements of operations for the
period then ended and changes in net assets for each period in the two periods
then ended. These financial statements are the responsibility of First Variable
Life Insurance Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
Our procedures included confirmation of the securities owned as of December 31,
1995 by correspondence with Variable Investors Series Trust. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Variable Life Insurance
Company--First Variable Annuity Fund E at December 31, 1995, and the results of
its operations for the period then ended and changes in its net assets for each
of the periods in the two periods then ended, in conformity with generally
accepted accounting principles.
s/ Ernst & Young LLP
--------------------
ERNST & YOUNG LLP
January 25, 1996
44
<PAGE>
First Variable Life Insurance Company
First Variable Annuity Fund E
Statement of Assets, Liabilities and
Contract Owners' Equity
December 31, 1995
<TABLE>
<CAPTION>
U.S.
Cash Common High Income Multiple Tilt Government World
Management Stock Bond Strategies Utility Bond Equity
Total Division Division Division Division Division Division Division
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments in
Variable
Investors Series $97,347,529 $8,280,967 $15,946,892 $7,573,144 $21,611,312 $13,445,900 $8,065,649 $15,277,389
Trust at value
(cost $91,636,693)
Receivable from
First Variable
Life Insurance
Company 17,618 1,628 1,800 2,905 672 7,941 1,530
-------------------------------------------------------------------------------------------------------------
Total $97,365,147 $8,280,967 $15,948,520 $7,574,944 $21,614,217 $13,446,572 $8,073,590 $15,278,919
=============================================================================================================
Liabilities
Payable to First
Variable Life
Insurance Company $ 20 $ 20
-------------------------------------------------------------------------------------------------------------
Total liabilities $ 20 $ 20
Contract owners'
equity:
Annuity contracts
in payment period 277,508 261,064 $ 16,444
Variable annuity
contract
owners' equity 97,087,619 8,019,883 15,932,076 $7,574,944 $21,614,217 $13,446,572 $8,073,590 $15,278,919
-------------------------------------------------------------------------------------------------------------
Total contract
owners' equity 97,365,127 8,280,947 15,948,520 7,574,944 21,614,217 13,446,572 8,073,590 15,278,919
-------------------------------------------------------------------------------------------------------------
Total liabilities
and contract
owners' equity $97,365,147 $8,280,967 $15,948,520 $7,574,944 $21,614,217 $13,446,572 $8,073,590 $15,278,919
=============================================================================================================
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
Growth and
Income Small Cap
Division Division
-----------------------------
<S> <C> <C>
Assets
Investments in
Variable
Investors Series $3,334,758 $3,811,518
Trust at value
(cost $91,636,693)
Receivable from
First Variable
Life Insurance
Company 177 965
-----------------------------
Total $3,334,935 $3,812,483
=============================
Liabilities
Payable to First
Variable Life
Insurance Company
-----------------------------
Total liabilities
Contract owners'
equity:
Annuity contracts
in payment period
Variable annuity
contract
owners' equity $3,334,935 $3,812,483
-----------------------------
Total contract
owners' equity 3,334,935 3,812,483
-----------------------------
Total liabilities
and contract
owners' equity $3,334,935 $3,812,483
=============================
</TABLE>
See accompanying notes.
45
<PAGE>
First Variable Life Insurance Company
First Variable Annuity Fund E
Statement of Operations
Period ended December 31, 1995
<TABLE>
<CAPTION>
High U.S.
Cash Common Income Multiple Tilt Government
Management Stock Bond Strategies Utility Bond
Total Division Division Division Division Division Division
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 6,398,608 $423,306 $ 931,729 $ 663,543 $1,954,586 $ 640,595 $ 801,191
Expenses:
Fees paid to First Variable Life
Insurance
Risk and administrative charges 1,046,537 101,549 166,780 89,274 245,887 149,482 105,942
-------------------------------------------------------------------------------------------
Total expenses 1,046,537 101,549 166,780 89,274 245,887 149,482 105,942
-------------------------------------------------------------------------------------------
Net investment income 5,352,071 321,757 764,949 574,269 1,708,699 491,113 695,249
Realized and unrealized gain (loss)
Realized gain (loss) on Series
Trust:
Variable Investors Series Trust 47,339 892,623 (325,633) (363,483) (510,575) (433,224)
Net unrealized appreciation 11,878,900 2,078,887 763,785 3,447,663 3,134,928 1,155,615
-------------------------------------------------------------------------------------------
Net realized and unrealized gain 11,926,239 2,971,510 438,152 3,084,180 2,624,353 722,391
-------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $17,278,310 $321,757 $3,736,459 $1,012,421 $4,792,879 $3,115,466 $1,417,640
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Growth
World and Small
Equity Income Cap
Division Division(1) Division(2)
-------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends $ 844,123 $40,732 $ 98,803
Expenses:
Fees paid to First Variable Life
Insurance
Risk and administrative charges 161,354 12,583 13,686
-------------------------------------
Total expenses 161,354 12,583 13,686
-------------------------------------
Net investment income 682,769 28,149 85,117
Realized and unrealized gain (loss)
Realized gain (loss) on Series
Trust:
Variable Investors Series Trust 651,108 13,164 123,359
Net unrealized appreciation 1,181,856 44,376 71,790
-------------------------------------
Net realized and unrealized gain 1,832,964 57,540 195,149
-------------------------------------
Net increase in net assets
resulting from operations $2,515,733 $85,689 $280,266
=====================================
</TABLE>
See accompanying notes.
(1)From commencement of operations May 31, 1995.
(2)From commencement of operations May 4, 1995.
46
<PAGE>
First Variable Life Insurance Company
First Variable Annuity Fund E
Statements of Changes in Net Assets
Periods ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Cash Management Common Stock
Total Division Division
1995 1994 1995 1994 1995 1994
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income (loss) $5,352,071 $4,627,279 $ 321,757 $ 225,155 $ 764,949 $ (62,753)
Realized gain (loss) on Variable Investors
Series Trust shares
redeemed 47,339 (1,058,319) 892,623 (624,847)
Net unrealized appreciation (depreciation)
on investment
during the year 11,878,900 (5,037,723) 2,078,887 422,814
----------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 17,278,310 (1,468,763) 321,757 225,155 3,736,459 (264,786)
From contract owner transactions
Net proceeds from sale of accumulation units 31,781,440 11,452,610 11,592,315 1,173,464 2,892,495 1,755,267
Cost of accumulation units terminated and
exchanged (16,119,230) (21,683,494) (10,154,829) (1,700,393) 247 (4,252,079)
----------------------------------------------------------------------------------
Increase (decrease) in net assets from
contract owner transactions 15,662,210 (10,230,884) 1,437,486 (526,929) 2,892,742 (2,496,812)
----------------------------------------------------------------------------------
Increase (decrease) in net assets 32,940,520 (11,699,647) 1,759,243 (301,774) 6,629,201 (2,761,598)
Net assets at beginning of period 64,424,607 76,124,254 6,521,704 6,823,478 9,319,319 12,080,917
----------------------------------------------------------------------------------
Net assets at end of period $97,365,127 $64,424,607 $8,280,947 $6,521,704 $15,948,520 $9,319,319
==================================================================================
</TABLE>
<TABLE>
<CAPTION>
High Income Multiple Strategies
Bond Division Division
1995 1994 1995 1994
-----------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income (loss) $ 574,269 $ 569,669 $1,708,699 $1,604,049
Realized gain (loss) on Variable Investors
Series Trust shares
redeemed (325,633) (907,055) (363,483) 134,159
Net unrealized appreciation (depreciation)
on investment
during the year 763,785 (278,307) 3,447,663 (2,582,130)
-----------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1,012,421 (615,693) 4,792,879 (843,922)
From contract owner transactions
Net proceeds from sale of accumulation units 1,825,744 1,335,168 3,644,779 1,964,200
Cost of accumulation units terminated and
exchanged (767,511) (6,256,547) (2,723,046) (1,092,025)
-----------------------------------------------------
Increase (decrease) in net assets from
contract owner transactions 1,058,233 (4,921,379) 921,733 872,175
-----------------------------------------------------
Increase (decrease) in net assets 2,070,654 (5,537,072) 5,714,612 28,253
Net assets at beginning of period 5,504,290 11,041,362 15,899,605 15,871,352
-----------------------------------------------------
Net assets at end of period $7,574,944 $5,504,290 $21,614,217 $15,899,605
=====================================================
</TABLE>
47
<PAGE>
First Variable Life Insurance Company
First Variable Annuity Fund E
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
Tilt Utility U.S. Government World Equity
Division Bond Division Division
Year ended December 31 Year ended December 31 Year ended December 31
1995 1994 1995 1994 1995 1994
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income (loss) $ 491,113 $1,236,179 $ 695,249 $ 681,931 $ 682,769 $ 373,049
Realized gain (loss) on Variable Investors
Series Trust shares redeemed (510,575) 316,582 (433,224) (463,812) 651,108 486,654
Net unrealized appreciation (depreciation)
on investments during the year 3,134,928 (1,796,822) 1,155,615 (613,499) 1,181,856 (189,779)
-------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 3,115,466 (244,061) 1,417,640 (395,380) 2,515,733 669,924
From contract owner transactions
Net proceeds from sale of accumulation units 2,850,015 1,321,190 833,394 1,399,563 4,087,219 2,503,758
Cost of accumulation units terminated and
exchanged (1,749,546) (1,904,157) (3,642,421) (2,862,433) 191,892 (3,615,860)
-------------------------------------------------------------------------------------
Increase (decrease) in net assets from
contract owner transactions 1,100,469 (582,967) (2,809,027) (1,462,870) 4,279,111 (1,112,102)
-------------------------------------------------------------------------------------
Increase (decrease) in net assets 4,215,935 (827,028) (1,391,387) (1,858,250) 6,794,844 (442,178)
Net assets at beginning of period 9,230,637 10,057,665 9,464,977 11,323,227 8,484,075 8,926,253
-------------------------------------------------------------------------------------
Net assets at end of period $13,446,572 $9,230,637 $8,073,590 $9,464,977 $15,278,919 $8,484,075
=====================================================================================
</TABLE>
Growth and
Income Small Cap
Division(1) Division(2)
Seven Eight
months months
ended ended
December 31 December 31
1995 1995
-------------------------------
Operations $ 28,149 $ 85,117
Net investment income (loss)
Realized gain (loss) on Variable Investors 13,164 123,359
Series Trust shares redeemed
Net unrealized appreciation (depreciation)
on investments 44,376 71,790
during the year -------------------------------
Net increase (decrease) in net assets 85,689 280,266
resulting from operations
From contract owner transactions
Net proceeds from sale of accumulation units 2,069,284 1,986,195
Cost of accumulation units terminated and
exchanged 1,179,962 1,546,022
-------------------------------
Increase (decrease) in net assets from
contract owner transactions 3,249,246 3,532,217
-------------------------------
Increase (decrease) in net assets 3,334,935 3,812,483
Net assets at beginning of period
-------------------------------
Net assets at end of period $3,334,935 $3,812,483
===============================
See accompanying notes.
(1)From commencement of operations May 31, 1995.
(2)From commencement of operations May 4, 1995.
48
<PAGE>
First Variable Life Insurance Company
First Variable Annuity Fund E
Notes to Financial Statements
December 31, 1995
1. Organization
First Variable Annuity Fund E (the Fund) is a segregated account of First
Variable Life Insurance Company (First Variable Life) and is registered as a
unit investment trust under the Investment Company Act of 1940, as amended,
(1940 Act). Each of the nine investment divisions of the Fund are invested
solely in the shares of the nine corresponding portfolios of the Variable
Investors Series Trust (the Trust), a no-load, diversified, open-end, series
management investment company registered under the 1940 Act. Under applicable
insurance law, the assets and liabilities of the Fund are clearly identified and
distinguished from the other assets and liabilities of First Variable Life. The
Fund cannot be charged with liabilities arising out of any other business of
First Variable Life.
First Variable Life is a wholly-owned subsidiary of Irish Life of North America,
Inc. (ILoNA), which is a wholly-owned subsidiary of Irish Life, plc. (Irish
Life) of Dublin, Ireland. All outstanding shares of the Company were purchased
by ILoNA from Monarch Life Insurance Company (Monarch Life), a Massachusetts
life insurance company, on September 22, 1994. First Variable Life is domiciled
in the State of Arkansas.
The assets of the Fund are not available to meet the general obligations of
First Variable Life or ILoNA and are held for the exclusive benefit of the
contract owners participating in the Fund.
The Small Cap Division commenced operations on May 4, 1995 and the Growth and
Income Division commenced operations on May 31, 1995. Effective April 1, 1994,
the name of the Equity Income Division was changed to the Tilt Utility Division.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund in preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles.
Investments
The investments in shares of the Trust are stated at the net asset value per
share of the respective portfolios of the Trust. Investment transactions are
accounted for on the date the shares are purchased or sold. The cost of shares
sold and redeemed is determined on the first-in, first-out method. Dividends and
capital gain distributions received from the Trust are reinvested in additional
shares of the Trust and are recorded as income by the Fund on the ex-dividend
date.
49
<PAGE>
First Variable Life Insurance Company
First Variable Annuity Fund E
Notes to Financial Statements
December 31, 1995
Federal Income Taxes
For federal income tax purposes, operations of the Fund are combined with those
of First Variable Life which is taxed as a life insurance company. First
Variable Life anticipates no tax liability resulting from the operations of the
Fund. Therefore, no provision for income taxes has been charged against the
Fund.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimated and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
3. Investments
The following table presents selected data for investments in each of the
Portfolios of the Trust at December 31, 1995.
<TABLE>
<CAPTION>
Number of Shares Cost Net Asset Value
----------------------------------------------------
<S> <C> <C> <C>
Cash Management Portfolio 8,280,967 $ 8,280,967 $ 8,280,967
Common Stock Portfolio 616,518 13,978,802 15,946,892
High Income Bond Portfolio 881,679 7,646,057 7,573,144
Multiple Strategies Portfolio 1,794,562 20,361,577 21,611,312
Tilt Utility Portfolio 856,190 12,117,345 13,445,900
U.S. Government Bond Portfolio 767,443 8,054,655 8,065,649
World Equity Portfolio 1,107,497 14,167,180 15,277,389
Growth & Income Portfolio 298,528 3,290,382 3,334,758
Small Cap Portfolio 301,624 3,739,728 3,811,518
-----------------------------------
Totals $91,636,693 $97,347,529
===================================
</TABLE>
50
<PAGE>
First Variable Life Insurance Company
First Variable Annuity Fund E
Notes to Financial Statements
December 31, 1995
4. Contract Owners' Equity
Variable contract owners' equity at December 31, 1995 consists of the following:
<TABLE>
<CAPTION>
Accumulation Units Accumulation Unit
Value Equity
-------------------------------------------------------------
<S> <C> <C> <C>
Policy Forms 7500.1, 7600.1, 7700 and 7750
Cash Management Division 228,050.120 $14.398 $ 3,283,466
Common Stock Division (7500.1) 29,883.296 24.564 734,053
Common Stock Division 287,373.021 21.875 6,286,285
High Income Bond Division 124,434.825 20.290 2,524,783
Multiple Strategies Division 374,792.788 20.732 7,770,204
Tilt Utility Division 182,817.016 25.279 4,621,431
U.S. Government Bond Division 244,832.655 18.767 4,594,774
World Equity Division 288,517.252 16.242 4,686,097
Growth & Income Division 5,469.387 11.228 61,410
Small Cap Division 14,884.171 12.942 192,631
-------------------
Subtotal 34,755,134
Policy Forms 7800 and 20224
Cash Management Division 406,001.876 $ 11.666 $ 4,736,417
Common Stock Division 518,976.413 17.054 8,850,625
High Income Bond Division 309,472.310 16.256 5,030,780
Multiple Strategies Division 795,701.787 17.322 13,783,146
Tilt Utility Division 455,858.521 19.338 8,815,392
U.S. Government Bond Division 222,013.135 15.320 3,401,241
World Equity Division 719,093.581 14.674 10,551,979
Growth & Income Division 289,199.736 11.218 3,244,244
Small Cap Division 278,163.224 12.931 3,596,929
-------------------
Subtotal 62,010,753
</TABLE>
51
<PAGE>
First Variable Life Insurance Company
First Variable Annuity Fund E
Notes to Financial Statements
December 31, 1995
4. Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Accumulation Units Accumulation Unit
Value Equity
-------------------------------------------------------------
<S> <C> <C> <C>
Policy Form 20230
Cash Management Division 0 10.062 $ 0
Common Stock Division 6,025.716 10.142 61,113
High Income Bond Division 1,905.344 10.172 19,381
Multiple Strategies Division 5,994.964 10.153 60,867
Tilt Utility Division 918.035 10.619 9,749
U.S. Government Bond Division 7,531.518 10.300 77,575
World Equity Division 3,988.553 10.240 40,843
Growth & Income Division 2,754.282 10.631 29,281
Small Cap Division 2,212.444 10.361 22,923
-------------------
Subtotal $ 321,732
-------------------
Total $97,087,619
===================
</TABLE>
5. Purchases and Sales of Securities
Cost of purchases and proceeds from sales of Trust shares by the Fund during the
period ended December 31, 1995 are shown below.
<TABLE>
<CAPTION>
Purchases Sales
------------------------------------
<S> <C> <C>
Cash Management Portfolio $23,294,272 $21,253,764
Common Stock Portfolio 10,900,222 7,259,116
High Income Bond Portfolio 7,272,026 5,641,323
Multiple Strategies Portfolio 7,737,227 5,109,698
Tilt Utility Portfolio 6,357,887 4,766,977
U.S. Government Bond Portfolio 3,760,450 5,882,170
World Equity Portfolio 10,391,152 5,430,801
Growth & Income Portfolio 3,449,539 172,321
Small Cap Portfolio 5,209,053 1,592,684
------------------------------------
Totals $78,371,828 $57,108,854
====================================
</TABLE>
52
<PAGE>
First Variable Life Insurance Company
First Variable Annuity Fund E
Notes to Financial Statements
December 31, 1995
6. Expenses
First Variable Life charges the Fund, based on the value of the Fund, at an
annual rate of 0.6% for mortality risks, 0.15% for distribution expense risks
and .40% for administrative expense risks, on policies issued prior to May 1,
1987 which were not exchanged from policy form 7500.1 to policy form 7600.1.
First Variable Life charges the Fund, based on the value of the Fund, at an
annual rate of 0.75% for mortality expense risks and 0.50% for administrative
expense risks on policies issued after April 30, 1987 and on policies exchanged
for policy form 7600.1. First Variable Life charges the Fund, based on the value
of the Fund, at an annual rate of 0.85% for mortality risks, 0.40% for expense
risks and 0.15% for administrative charges on policies issued under policy forms
7800 and 20224. First Variable Life charges the Fund, based on the value of the
Fund, at an annual value of 0.85% for mortality risks, 0.40% for expense risks
and 0.25% for administrative charges on policies issued under policy form 20230.
Total charges to the Fund for all the policy forms for the period ended December
31, 1995 were $1,046,537.
7. Diversification Requirements
Under the provisions of Section 817(h) of the Internal Revenue Code, a variable
annuity contract, other than a contract issued in connection with certain types
of employee benefits plans, will not be treated as an annuity contract for
federal tax purposes for any period for which the investments of the segregated
asset account on which the contract is based are not adequately diversified. The
Code provides that the "adequately diversified" requirement may be met if the
underlying investments satisfy either a statutory safe harbor test or
diversification requirements set forth in regulations issued by the Secretary of
Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of the
Code. First Variable Life believes that the Fund satisfies the current
requirements of the regulations, and it intends that the Fund will continue to
meet such requirements.
8. Principal Underwriter and General Distributor
First Variable Capital Services, Inc., a wholly-owned subsidiary of First
Variable Life, is principal underwriter and general distributor of the contracts
issued through the Fund.
9. Investment Advisory and Business Management Agreements
On December 17, 1993, the Trustees of the Trust voted to terminate the existing
Investment Advisory and Business Management Agreements between the Trust and
INVESCO Capital Management, Inc., and to approve a new Investment Advisory
Agreement between the Trust and First Variable Advisory Services Corp., a
wholly-owned subsidiary of First Variable Life. These changes became effective
on April 1, 1994.
53
<PAGE>
Report of Independent Auditors
To the Board of Directors and Shareholder
First Variable Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of First
Variable Life Insurance Company (the Company) as of December 31, 1995 and 1994,
and the related statutory-basis statements of operations, capital and surplus,
and cash flow for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits of the accompanying statutory-basis financial statements
in accordance with generally accepted auditing standards; however, as discussed
in the following paragraph, we were not engaged to determine or audit the
effects of the variances between statutory accounting practices and generally
accepted accounting principles. Generally accepted auditing standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion on the accompanying
statutory-basis financial statements.
The Company presents its financial statements in conformity with accounting
practices prescribed or permitted by the Arkansas Insurance Department. When
statutory-basis financial statements are presented for purposes other than for
filing with a regulatory agency, generally accepted auditing standards require
that the auditors' report on such statements indicate whether they are presented
in conformity with generally accepted accounting principles. The accounting
practices used by the Company vary from generally accepted accounting principles
as explained in Note 1, and the Company has not determined the effects of those
variances. Accordingly, we were not engaged to audit, and we did not audit, the
effects of those variances. Since the accompanying financial statements do not
purport to be a presentation in conformity with generally accepted accounting
principles, we are not in a position to express, and we do not express, an
opinion on the financial statements referred to above as to fair presentation of
financial position, results of operations or cash flows in conformity with
generally accepted accounting principles.
In our opinion, the statutory-basis financial statements referred to above
present fairly, in all material respects, the financial position of First
Variable Life Insurance Company at December 31, 1995 and 1994, and the results
of its operations and its cash flows for the years then ended, in conformity
with accounting practices prescribed or permitted by the Arkansas Insurance
Department.
s/Ernst & Young LLP
-------------------
ERNST & YOUNG LLP
January 25, 1996
54
<PAGE>
First Variable Life Insurance Company
Balance Sheets--Statutory Basis
<TABLE>
<CAPTION>
December 31
1995 1994
(In thousands)
<S> <C> <C>
Admitted assets
Cash and invested assets:
Bonds $302,616 $247,511
Common stocks 343 476
Cash and short-term investments 5,564 54,731
Total cash and invested assets 308,523 302,718
Investment income due and accrued 5,943 5,199
Other admitted assets 404 171
Separate account assets 132,176 94,282
Total admitted assets $447,046 $402,370
Liabilities and capital and surplus
Liabilities:
Annuity contract reserve $272,804 $261,934
Interest maintenance reserve 4,833 4,945
Federal income taxes 0 17
Remittances not allocated (365) 1,935
Asset valuation reserve 2,954 2,783
Transfers from separate accounts (1,369) (1)
Payable to affiliates 1 58
Other liabilities 1,375 4,743
Separate account liabilities 132,176 94,282
Total liabilities 412,409 370,696
Capital and surplus:
Capital stock, par value $1.00 per share:
Authorized-3,500,000 shares
Issued and outstanding-2,500,000 shares 2,500 2,500
Additional paid-in capital 22,555 17,555
Unassigned surplus 9,582 11,619
Total capital and surplus 34,637 31,674
Total liabilities and capital and surplus $447,046 $402,370
</TABLE>
See accompanying notes.
55
<PAGE>
First Variable Life Insurance Company
Statements of Operations, Capital and Surplus--Statutory Basis
<TABLE>
<CAPTION>
Year ended December 31
1995 1994
(In thousands)
<S> <C> <C>
Premiums and other revenues:
Premiums and other considerations $67,063 $109,941
Investment income, less investment expenses 22,939 17,425
Other income 598 811
Total premiums and other revenues 90,600 128,177
Benefits and expenses
Benefit payments to policyholders and beneficiaries 62,339 71,385
Increase in annuity contract reserve 10,870 69,954
Total benefits paid or provided 73,209 141,339
Insurance expenses:
Commissions 3,738 1,560
General insurance expenses 5,693 4,979
Insurance taxes, licenses and fees 309 932
Other 302 115
Total insurance expenses 10,042 7,586
83,251 148,925
Net transfers to (from) separate accounts 9,133 (20,359)
Loss from operations before federal income tax benefit and net
realized capital losses (1,784) (389)
Federal income tax benefit (17) (43)
Loss from operations before net realized capital gains (losses)
(1,767) (346)
Net realized capital gains (losses), less related federal income tax
expense (1995-$0; 1994-$60) and amounts transferred to the interest
maintenance reserve (1995-($20); 1994-$470) 307 (228)
Net loss (1,460) (574)
Changes in net unrealized capital gains (losses) (133) 7,624
Net (increase) decrease in non-admitted assets (273) 198
(Increase) decrease in asset valuation reserve (171) 1,342
Loss on sale of limited partnerships (8,606)
Contributed capital from parent company 5,000
Net increase (decrease) in capital and surplus 2,963 (16)
Capital and surplus, beginning of year 31,674 31,690
Capital and surplus, end of year $34,637 $ 31,674
</TABLE>
See accompanying notes.
56
<PAGE>
First Variable Life Insurance Company
Statements of Cash Flows--Statutory Basis
<TABLE>
<CAPTION>
Year ended December 31
1995 1994
(In thousands)
<S> <C> <C>
Operations
Premiums and other considerations $ 67,063 $110,428
Investment income, less investment expenses 22,189 16,802
Other income 34 762
Benefits (62,339) (71,163)
Insurance expenses (10,056) (6,993)
Federal income taxes paid (recovered) 60 (380)
Transfers to (from) separate accounts (10,207) 20,698
Other expenses (303) (439)
Net cash provided by operations 6,441 69,715
Proceeds from investments sold, matured or repaid:
Bonds 19,378 15,450
Common stocks 1,807 14
Other invested assets 9,685
21,185 25,149
Tax on capital gains (60) (590)
Other cash provided:
Capital and surplus paid in 5,000
Other sources 403 6,213
Total other cash provided 5,403 6,213
Total cash provided 32,969 100,487
Cost of investments acquired:
Bonds (74,567) (49,883)
Common stocks (1,500) (14)
Other invested assets (258)
Total cost of investments acquired (76,067) (50,155)
Other cash applied:
Other (6,069) (2,618)
Total cash used (82,136) (52,773)
Increase (decrease) in cash and short-term investments (49,167) 47,714
Cash and short-term investments at beginning of year 54,731 7,017
Cash and short-term investments at end of year $ 5,564 $ 54,731
</TABLE>
See accompanying notes.
57
<PAGE>
First Variable Life Insurance Company
Notes to Financial Statements--Statutory Basis
December 31, 1995
1. Significant Accounting Policies
Organization
First Variable Life Insurance Company (the Company), a life insurance company
domiciled in the State of Arkansas, is a wholly-owned subsidiary of Irish Life
of North America, Inc. (ILoNA), which is owned by Irish Life, plc (Irish Life)
of Dublin, Ireland. All outstanding shares of the Company were purchased by
ILoNA from Monarch Life Insurance Company (Monarch Life), a Massachusetts life
insurance company, on September 22, 1994.
The Company is licensed in 49 states and sells variable and fixed annuity
products through regional wholesalers and insurance brokers.
Basis of Presentation
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the Arkansas Insurance
Department, which practices differ in some respects from generally accepted
accounting principles (GAAP). The more significant of these differences are as
follows: (a) bonds are generally carried at amortized cost rather than
segregating the portfolio into held-to-maturity (carried at amortized cost),
held-for-sale (carried at fair value), and trading (carried at fair value)
classifications; (b) policy reserves are based on statutory mortality tables
rather than on the basis of the mortality, interest and withdrawal assumptions
anticipated by the Company when the policies were issued, as would be used for
GAAP. Statutory annuity reserves are stated at values which, in the aggregate,
are not less than those prescribed by the Commissioner's Annuity Reserve
Valuation Method (CARVM); for GAAP, annuity reserves would be stated at account
value; (c) expenses relating to the acquisition of new business are charged to
operations as incurred rather than being deferred and amortized over the period
that the related income is earned. Commissions and expense allowances on
reinsurance ceded are recognized as income when due rather than deferred and
amortized over the terms of the respective reinsurance agreements; (d) certain
assets, principally amounts due from other companies and furniture and
equipment, designated as "nonadmitted assets," are excluded from the balance
sheet and are charged to unassigned surplus; (e) net realized gains or losses
attributed to changes in the level of interest rates in the market are deferred
and amortized over the remaining life of the bond rather than recognized as
gains or losses in the statement of operations when the sale is completed; (f)
declines in the estimated realizable value of investments are recognized through
the establishment of a formula-determined statutory investment reserve (carried
as a liability) whose changes are reflected directly in surplus, rather than
through reductions in the statement of operations, when such declines are judged
to be other than temporary; (g) deferred federal income taxes are not provided
for the effects of differences in the bases of assets and liabilities reported
for financial statement and income tax purposes, as would be the treatment under
GAAP; (h) investments in subsidiaries are carried on the basis of their equity
in net assets and changes in the carrying amounts of subsidiaries are credited
or charged directly to unassigned surplus rather than included in the
determination of net income (under GAAP, wholly-owned subsidiaries are presented
on a consolidated basis); (i) net unrealized investment gains and losses are not
segregated as a separate component of capital and surplus, as is required by
GAAP; and (j) pension expense is recognized in accordance with rules and
regulations permitted by the Employee Retirement Income Security Act of 1974
rather than on an accrual basis.
The effects of the foregoing variances from GAAP on the accompanying
statutory-basis financial statements have not been determined.
First Variable Life Insurance Company
58
<PAGE>
Notes to Financial Statements--Statutory Basis (continued)
1. Significant Accounting Policies (continued)
Investments
Investments are valued in accordance with methods prescribed by the Securities
Valuation Office of the National Association of Insurance Commissioners (NAIC).
Investments in bonds not backed by other loans are generally carried at
amortized cost using the interest method. Loan-backed bonds are valued at
amortized cost using the interest method including anticipated prepayments.
Prepayment assumptions are obtained from dealer survey values or internal
estimates and are consistent with the current interest rate and economic
environment. The retrospective adjustment method is used to value all
securities.
Common stocks are generally carried at market value.
Investments
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of twelve months or less to be
cash equivalents.
Investments in separate accounts are carried at market value. Cash and
short-term investments are stated at cost which approximates market value.
Realized gains and losses on investments are determined using the first-in,
first-out basis and are recognized in net income, net of related federal income
taxes and amounts transferred to the Interest Maintenance Reserve. Unrealized
capital gains and losses, resulting from changes in the difference between cost
and the carrying value of investments, are reflected in surplus.
Interest income is recognized on an accrual basis. The Company does not accrue
interest on bonds in default or where management determines collection is
uncertain.
Annuity Contract Reserve
The reserves for annuity contracts, all developed by actuarial methods, are
established and maintained on the basis of published mortality tables using
assumed interest rates and valuation methods that will provide, in the
aggregate, reserves that are greater than the minimum valuation required by law
or guaranteed policy cash values.
Recognition of Premium Revenues and Costs
Premiums are recognized as revenues over the premium-paying period, whereas
commissions and other costs applicable to the acquisition of new business are
charged to
operations as incurred.
Federal Income Taxes
Generally, the Company records income tax expense based on estimates of amounts
that will be due and payable based on current year's taxable income, without
regard to deferred income taxes.
Separate Accounts
The separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered for variable annuity
contracts, and for which the contract owner, rather than the Company, bears the
investment risk.
59
<PAGE>
First Variable Life Insurance Company
Notes to Financial Statements--Statutory Basis (continued)
1. Significant Accounting Policies (continued)
Separate Accounts (continued)
Separate account assets, comprised principally of shares of Variable Investors
Series Trust, primarily represent funds deposited by separate account contract
owners segregated into accounts with specific investment objectives. The assets
are carried at market value. An offsetting liability is maintained to the extent
of contract owners' interests in the assets.
Transfers from separate accounts represent the net premium and benefit
withdrawals between the separate accounts and the Company's general account, as
well as charges assessed the separate accounts for the assumption of mortality,
distribution, administrative and other expense risks, and for administrative
charges by the Company.
Premiums
Approximately 49% of the direct business written in 1995 was written through one
wholesaler. The Company's management believes that other broker/dealers could
generate the same level of sales on comparable terms. Direct premiums are not
concentrated in any geographical area.
Use of Estimates
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known, which could impact
the amounts reported and disclosed herein.
2. Permitted Statutory Accounting Practices
The Company's statutory-basis financial statements are prepared in accordance
with accounting practices prescribed or permitted by the Arkansas Insurance
Department. "Prescribed" statutory accounting practices include state laws,
regulations, and general administrative rules, as well as a variety of
publications of the NAIC. "Permitted" statutory accounting practices encompass
all accounting practices that are not prescribed; such practices may differ from
state to state, may differ from company to company within a state, and may
change in the future. The NAIC currently is in the process of recodifying
statutory accounting practices, the result of which is expected to constitute
the only source of "prescribed" statutory accounting practices. Accordingly,
that project, which is expected to be completed in 1997, will likely change, to
some extent, prescribed statutory accounting practices, and may result in
changes to the accounting practices that the Company uses to prepare its
statutory financial statements.
In 1994, the Company received written approval from the Arkansas Insurance
Department to report a portion of realized losses on the sale of limited
partnerships which related to prior years as a direct charge to surplus offset
by the resultant change in unrealized losses. This transaction had no net effect
on surplus.
60
<PAGE>
First Variable Life Insurance Company
Notes to Financial Statements--Statutory Basis (continued)
3. Investment Operations
Components of net investment income are as follows:
Year ended December 31
1995 1994
(In thousands)
Bonds $22,016 $16,349
Short-term investments 1,042 1,066
Limited partnership interests 0 31
Amortization of IMR 92 79
Other 10 187
23,160 17,712
Less investment expenses (221) (287)
Net investment income $22,939 $17,425
At December 31, 1995 and 1994, the carrying value and estimated fair value of
the Company's portfolio of bonds are as follows:
<TABLE>
<CAPTION>
Gross Unrealized Gross Unrealized
Carrying Value Gains Losses Estimated Fair
Value
(In thousands)
<S> <C> <C> <C> <C>
December 31, 1995
Bonds:
U.S. Treasury and other U.S.
Government obligations $ 35,548 $ 1,212 $ (63) $ 36,697
Public utilities 95,820 5,325 (698) 100,447
Corporate 141,313 11,287 (53) 152,547
Mortgage-backed 29,935 296 (333) 29,898
$302,616 $18,120 $(1,147) $319,589
</TABLE>
<TABLE>
<CAPTION>
Gross Unrealized Gross Unrealized
Carrying Value Gains Losses Estimated Fair
Value
(In thousands)
<S> <C> <C> <C> <C>
December 31, 1994
Bonds:
U.S. Treasury and other U.S.
Government obligations $ 31,113 $ 67 $ (2,705) $ 28,475
Public utilities 69,273 162 (7,489) 61,946
Corporate 124,025 1,093 (6,196) 118,922
Mortgage-backed 23,100 16 (2,642) 20,474
$247,511 $ 1,338 $(19,032) $229,817
</TABLE>
61
<PAGE>
First Variable Life Insurance Company
Notes to Financial Statements--Statutory Basis (continued)
3. Investment Operations (continued)
The carrying value and estimated fair value of debt securities at December 31,
1995, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay certain obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Carrying Value Estimated Fair Value
(In thousands)
<S> <C> <C>
Bonds:
Due in one year or less $ 5,735 $ 5,707
Due after one year through five years 46,118 48,889
Due after five years through ten years 123,424 129,144
Due after ten years 97,404 105,951
Mortgage-backed securities 29,935 29,898
$302,616 $319,589
</TABLE>
Proceeds from the sales of investments in bonds during 1995 and 1994 were $19.4
million and $0; gross gains of $0.4 million and $0 and gross losses of $0.4
million and $0 were realized on those sales, respectively.
At December 3l, 1995, First Variable's investments with a carrying value of
$57.1 million, were held on deposit with various state insurance departments.
The Company's affiliated common stock investments represent its wholly-owned
subsidiaries, First Variable Capital Services, Inc. (FVCS), a registered
broker-dealer which commenced operations on December 1, 1992, and First Variable
Advisory Services Corp. (FVAS), an investment advisor which commenced operations
on April 1, 1994. The cost and carrying value of the Company's affiliated common
stock investments was $18,000 and $21,000, respectively at both December 31,
1995 and 1994.
The Company's unaffiliated common stock had a cost of $16,000 at both December
31, 1995 and 1994, and carrying value of $322,000 and $455,000 at December 31,
1995 and 1994, respectively.
Effective August 31, 1994, the Company transferred all limited partnership
assets to its former parent for the then current statement value. As stated in
Note 2, the Company classified losses incurred in prior years as a direct charge
to surplus offset by the resultant change in unrealized losses.
Concentrations of Credit Risk
The Company's investment in public utility bonds at December 31, 1995 represents
32% of total investments and 21% of admitted assets. The holdings of public
utility bonds are widely diversified and all issues met the Company's investment
policies and credit standards when purchased.
62
<PAGE>
First Variable Life Insurance Company
Notes to Financial Statements--Statutory Basis (continued)
4. Policy and Contract Attributes
Annuity Contract Reserves
The Company's major categories of reserves for annuity contracts and
supplementary contracts at December 31, 1995 and 1994 are summarized below:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Annuities $242,147 $233,229
Supplementary contracts with life contingencies 11,114 11,483
Supplementary contracts without life contingencies 19,543 17,222
Life and annuity reserves $272,804 $261,934
</TABLE>
At December 31, 1995, the Company's annuity contract reserves that are subject
to discretionary withdrawal (with adjustment), subject to discretionary
withdrawal (without adjustment), and not subject to discretionary withdrawal
provisions are summarized as follows:
<TABLE>
<CAPTION>
Amount Percent
(In thousands)
<S> <C> <C>
Subject to discretionary withdrawal (with adjustment):
With market value adjustment $ 32,443 8%
Subject to discretionary withdrawal (without adjustment) at book
value with minimal or no charge or adjustment
339,232 84
Not subject to discretionary withdrawal 31,724 8
Total annuity reserves and deposit fund liabilities $403,399 100%
</TABLE>
5. Federal Income Taxes
Differences between financial statement operating income before federal income
taxes and taxable income are primarily attributed to differences between book
and tax bases for investments, annuity contract reserves and tax basis deferred
acquisition costs.
The Company filed an election under Internal Revenue Code Section 338(h)(10)
which allowed the Company to record its tax-basis assets at market value at the
date the Company was acquired by ILoNA. The resulting tax-basis goodwill will be
amortized over a 10-15 year period.
In 1994, the Company filed its own separate federal income tax return covering
the period September 22, 1994 to December 31, 1994. From 1991 until September
21, 1994, the Company was included in the consolidated life/non-life federal
income tax returns of Regal Re, the Company's former ultimate parent, for which
taxes were provided under a written tax allocation agreement entered into on
September 23, 1992. This agreement terminated effective September 21, 1994.
There was a consolidated loss for 1994. Under the tax allocation agreement,
there was no provision for tax in 1994.
63
<PAGE>
First Variable Life Insurance Company
Notes to Financial Statements--Statutory Basis (continued)
6. Benefit Plans
Effective with the Company's purchase by ILoNA, substantially all of the
Company's employees became participants in a defined benefit pension plan which
ILoNA sponsors for its affiliated companies. Benefits are based on years of
service and the highest consecutive five years of compensation out of an
employee's final ten years of employment. The Company makes annual contributions
to the plan in amounts necessary to provide for normal costs and appropriate
prior service costs. No pension expense was recognized in the current year
because the plan was subject to the full funding limitation under the Internal
Revenue Code. As of the most recent actuarial valuation date, the total
accumulated benefit obligation determined in accordance with the Employee
Retirement Income Security Act of 1974 (ERISA) and valued as of January 1, 1995
was $2.9 million including vested benefits of $2.8 million. The fair value of
plan assets was $3.6 million.
Substantially all of the Company's employees are eligible for a 401(k) Employee
Saving Plan sponsored by ILoNA. Employees can contribute up to 15% of their
annual salary (with a maximum contribution of $9,240 in 1995) to the plan. The
Company contributes an additional amount, subject to limitations, based on the
voluntary contribution of the employee. Further, the plan provides for
additional employer contributions based on the discretion of the Board of
Directors. There is an incentive compensation plan for certain officers of the
Company.
7. Reinsurance
During 1994, the Company maintained a reinsurance agreement with Monarch Life,
on a coinsurance basis, whereby the Company ceded to Monarch Life certain
single-premium deferred annuity policies. This reinsured business was recaptured
effective August 30, 1994 at the time of the Company's acquisition by ILoNA. The
effect of the recapture was an increase in premiums of $74 million and an
increase in reserves of $72 million, resulting in a gain from the transaction,
reflected in operations, of $2 million. In 1994, the Company received $.4
million from Monarch Life for expense allowances for administration of the
policies reinsured. At December 31, 1995 and 1994, there is no reinsurance in
effect.
Additional information on direct business written and reinsurance ceded for the
year 1994 is set forth below:
<TABLE>
<CAPTION>
1994
(In thousands)
<S> <C>
Direct premiums $ 30,534
Reinsurance recaptured from Monarch Life 74,755
Net premiums $105,289
Direct annuity benefits and payments on supplementary contracts incurred
$ 14,181
Reinsurance ceded to Monarch Life (715)
Net annuity benefits and payments on supplementary contracts incurred
$ 13,466
</TABLE>
8. Dividend Restrictions and Common Stock Dividend
The maximum amount of dividends which could be paid to the Company's stockholder
would normally be restricted to the greater of 10% of the surplus at the
preceding December 31 or the net income from operations for the previous year.
This amount is $3.5 million at December 31, 1995; however, pursuant to a
directive received from the Arkansas Insurance Department in 1991, any proposed
payment of a dividend currently requires its approval.
64
<PAGE>
First Variable Life Insurance Company
Notes to Financial Statements--Statutory Basis (continued)
8. Dividend Restrictions and Common Stock Dividend (continued)
On December 14, 1994, the Company's board of directors authorized a 2/3 for 1
common stock dividend to increase the Company's capital stock to $2.5 million to
meet the minimum statutory capital requirement as mandated by certain states in
which the Company does business. The additional $1.0 million was transferred to
capital stock from additional paid in capital.
9. Separate Accounts Reconciliation
The separate accounts of the Company represent funds related to variable annuity
products. There are no guarantees associated with the separate account portion
of these products. The assets for these accounts are carried at market value.
Information regarding the separate accounts of the Company as of and for the
year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Premiums, deposits and other considerations $ 30,534
Reserves for separate accounts with assets at:
Fair value $130,807
Amortized cost 0
Total $130,807
Reserves for separate accounts by withdrawal characteristics:
At book value less current surrender charge of 5% or more $15,674
At book value less current surrender charge of 5% or less 114,822
130,496
Not subject to discretionary withdrawal 311
Total separate account liabilities $130,807
Following is a reconciliation of transfers as reported in the separate account
annual statement summary of operations and the Company's statement of operations
for the year ended December 31, 1995 (in thousands):
Transfers to separate accounts 33,541
Transfers from separate accounts (24,408)
Net transfers to (from) separate accounts as reported in the $ 9,133
separate account summary of operations
Transfers as reported in the Company's statement of operations $ 9,133
</TABLE>
Contract owners' interest in net investment income and realized and unrealized
capital gains and losses on separate account assets are not reflected in
operations. Fees charged on separate account contract owner deposits are
included in operations in the transfers from separate accounts line. These fees
during 1995 and 1994 amounted to $1.5 million and $1.3 million, respectively.
65
<PAGE>
First Variable Life Insurance Company
Notes to Financial Statements--Statutory Basis (continued)
10. Contingencies
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through a reduction in future premium taxes in certain
states. At December 31, 1995 and 1994, the Company has accrued $.1 million and
$.2 million, respectively, for guaranty fund assessments based on its historical
experience and information available from those making guaranty fund
assessments.
11. Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in estimating the
fair value disclosures for financial instruments in the accompanying financial
statements and notes thereto:
Investments: Fair values for bonds are based on quoted market prices, where
available. For securities not actively traded, fair values are estimated using
values obtained from independent pricing services. The fair values for common
stocks are based on quoted market prices.
Cash and Short-Term Investments: The carrying amounts reported in the
accompanying statutory-basis balance sheets for these financial instruments
approximate their fair values.
Annuity Contract Reserves: Fair values of the Company's liabilities under
contracts not involving significant mortality or morbidity risks (principally
deferred annuities), are stated at the cost the Company would incur to
extinguish the liability, i.e., the cash surrender value. The Company is not
required to estimate the fair value of its liabilities under other contracts.
The carrying values and estimated fair values of the Company's financial
instruments for which it is practicable to calculate a fair value are as
follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Carrying Value Estimated Fair Carrying Value Estimated Fair
Value Value
(In thousands)
<S> <C> <C> <C> <C>
Assets:
Bonds $302,616 $319,589 $247,511 $229,817
Common stocks 343 343 476 476
Liabilities:
Annuities and supplementary 272,804 271,212 261,934 260,318
contracts with and without
life contingencies
</TABLE>
66
<PAGE>
First Variable Life Insurance Company
Notes to Financial Statements--Statutory Basis (continued)
12. Related-Party Transactions
In addition to the related-party transactions reported in Notes 3, 5 and 6, the
Company has participated in the following related-party transactions:
The Company has agreements with its wholly-owned subsidiaries, FVCS and FVAS,
under which the Company performs various services (including accounting and data
processing) without charge to the subsidiaries. In addition, the Company
reimburses FVCS and FVAS for all direct costs incurred by FVCS and FVAS in their
operations.
During 1995 and 1994, the Company reimbursed FVCS and FVAS $282,000 and
$325,000, respectively, for these costs.
In accordance with the Company's investment advisory services agreement with
FVAS, the Company will reimburse FVAS if FVAS's revenues are inadequate to meet
its obligations. Included in the 1995 and 1994 reimbursement of $282,000 and
$325,000, respectively, noted above was $274,000 and $233,000, respectively,
related to this agreement.
The Company entered into an Expense Allocation Agreement with Monarch Life and
other affiliates on October 1, 1993. The agreement provided a methodology for
allocating and reimbursing both direct and overhead expenses. Amounts allocated
to the Company pursuant to this agreement were $1.6 million for 1994. The
agreement was terminated on September 21, 1994.
A management agreement was entered into with ILoNA in January 1995 to provide
for certain management services. In addition, an expense allocation agreement
was entered into with Interstate Assurance Company, a subsidiary of ILoNA, to
provide for certain administrative functions. Amounts paid during 1995 by the
Company pursuant to these agreements were $480,000 and $190,000, respectively.
67
<PAGE>
PART C
68
<PAGE>
FIRST VARIABLE ANNUITY FUND E
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements
The following financial statements of the Separate Account are included
in Part B hereof:
1. Report of Independent Auditors.
2. Statement of Assets, Liabilities and Contract Owners' Equity -
December 31, 1995.
3. Statement of Operations for the Period ended December 31, 1995.
4. Statements of Changes in Net Assets for the Periods ended December 31,
1995 and December 31, 1994.
5. Notes to Financial Statements - December 31, 1995.
The following financial statements of the Company are included in Part B
hereof:
1. Report of Independent Auditors.
2. Balance Sheets--Statutory Basis--December 31, 1995 and 1994.
3. Statements of Operations, Capital and Surplus--Statutory Basis--for
the Years ended December 31, 1995 and December 31, 1994 .
4. Statements of Cash Flows--Statutory Basis--for the Years ended
December 31, 1995 and December 31, 1994.
5. Notes to Financial Statements--Statutory Basis--December 31, 1995.
(b) Exhibits
1. Resolution of Board of Directors for the Company authorizing the
establishment of the Separate Account*
2. Not Applicable
3(a). Underwriting Agreement**
(b). Form of Sales Agreement**
(c). Form of Principal Underwriter's Agreement#
PART C
69
<PAGE>
ITEM 24 (b) (continued)
3(d). Form of Broker-Dealer Agreement#
4. Individual Flexible Purchase Payment Deferred Variable Annuity
Contract# #
5. Application for Variable Annuity # #
6. Articles of Incorporation and By-laws of First Variable Life Insurance
Company*
7. Not Applicable
8. Form of Fund Participation Agreement (to be filed by Amendment)
9. Opinion and Consent of Counsel# #
10. Consent of Ernst & Young LLP
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Information
14. Not Applicable
27. Financial Data Schedule
..................
* Incorporated by reference to the Registrant's Original Registration Statement
(File Nos. 2-92856 and 811-4092).
** Incorporated by reference to the Registrant's Post-Effective Amendment No. 3
to the Registration Statement (File Nos. 2-92856 and 811-4092)
# Incorporated by reference to the Registrant's Post-Effective Amendment No. 4
to Form N-4 (Files Nos. 33-35749 and 811-4092) as filed on April 30, 1993.
# # Incorporated by reference to the Registrant's Post-Effective Amendment No. 5
to Form N-4 (File Nos. 33-35749, 811-4092) as filed on or about December 30,
1993.
ITEM 25. OFFICERS AND DIRECTORS OF DEPOSITOR
The following are the Officers and Directors of the Company.
Name and Principal Positions and Offices with the Depositor
Business Address
Ronald M. Butkiewicz Chairman and Director
2211 York Road, Suite 202
Oakbrook, IL 60521
Stephan M. Largent President and Director
10 Post Office Square
Boston, MA 02109
70
<PAGE>
ITEM 25 (continued)
Michael J. Corey Director
401 East Host Drive
Lake Geneva, WI 53147
Michael R. Ferrari Director
25th & University Avenue
Des Moines, IA 50311
Peter D. Fullam Director
Lower Abbey Street
Dublin 1, Ireland
T. David Kingston Director
Lower Abbey Street
Dublin 1, Ireland
Jeff S. Liebmann Director
1301 Avenue of the Americas
New York, NY 10019
Kenneth R. Meyer Director
200 South Wacker Drive, Suite 2100
Chicago, IL 60606
Phillip R. O'Connor Director
111 West Washington, Suite 1247
Chicago, IL 60602
Norman A. Fair Director
2211 York Road, Suite 202
Oakbrook, IL 60521
Thomas K. Neavins Director
2211 York Road, Suite 202
Oakbrook, IL 60521
Arnold R. Bergman Vice President - Legal & Administration
10 Post Office Square and Secretary
Boston, MA 02109
Martin Sheerin Vice President and Chief Actuary
10 Post Office Square
Boston, MA 02109
Mark Reynolds Vice President and Treasurer
10 Post Office Square
Boston, MA 02109
Anthony Koenig, Jr. Assistant Controller
10 Post Office Square
Boston, MA 02109
Constance Graves Assistant Controller
10 Post Office Square
Boston, MA 02109
71
<PAGE>
ITEM 25 (continued)
Mark Kelly Assistant Treasurer
10 Post Office Square
Boston, MA 02109
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
DEPOSITOR OR REGISTRANT.
Incorporated by reference to Registrant's Post Effective Amendment No.
18 filed April 28, 1995. (File Nos. 33-35749 and 811-4092).
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 28, 1996, there were 991 Owners of Qualified Contracts and
2,142 Owners of Non-Qualified Contracts.
ITEM 28. INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities
Act of 1933 ("Act") may be permitted to directors and officers and controlling
persons of the Registrant, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITER
(a) First Variable Capital Services, Inc. ("FVCS") is the principal underwriter
for the Contracts and for the following investment companies:
First Variable Annuity Fund A
Monarch Life Insurance Company Separate Account VA
(b) The following persons are directors and officers of FVCS:
Name and Principal Business Address. Positions and Offices with Underwriter
Norman A. Fair Director
2211 York Road, Suite 202
Oakbrook, IL 60521
Stephan M. Largent President and Director
10 Post Office Square
Boston, MA 02109
Arnold R. Bergman Secretary
10 Post Office Square
Boston, MA 02109
Mark Reynolds Treasurer and Director
10 Post Office Square
Boston, MA 02109
72
<PAGE>
ITEM 29. (continued)
Anthony Koenig, Jr. Assistant Treasurer
10 Post Office Square
Boston, MA 02109
Mark Kelly Assistant Treasurer
10 Post Office Square
Boston, MA 02109
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Mark E. Reynolds, and Arnold R. Bergman, who are located at 10 Post
Office Square, 12th Floor, Boston, MA 02109, maintain physical possession of the
accounts, books or documents of the Separate Account required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
sixteen (16) months old for so long as payment under the variable annuity
contracts may be accepted.
(b) Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under this
Form promptly upon written oral request.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No Action Letter issued
to the American Council of Life Insurance dated November 28, 1988 (Commission
ref. IP-6-88) and that the following provisions have been complied with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b) (11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase
the contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant understanding of (1) the restriction on redemption
imposed by Section 403(b)(11), and (2) other investment alternatives available
under the employer's Section 403(b) arrangement to which the participant may
elect to transfer his contract value.
73
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, as amended, the Registrant certifies that it meets the requirements
of Securities Act Rule 485(b) for effectiveness of this Registration Statement
and has caused this Registration Statement to be signed on its behalf, in the
City of Boston, and the Commonwealth of Massachusetts, on this 26th day of
April, 1996.
FIRST VARIABLE ANNUITY FUND E
(Registrant)
By: FIRST VARIABLE LIFE INSURANCE COMPANY
(Depositor)
By: s/Stephan M. Largent
-----------------------------------
Stephan M. Largent, President
FIRST VARIABLE LIFE INSURANCE COMPANY
(Depositor)
By: s/Stephan M. Largent
-----------------------------------
Stephan M. Largent, President
74
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
s/Ronald M. Butkiewicz Chairman & Director April 23, 1996
- --------------------- ---------------
Ronald M. Butkiewicz
s/Michael J. Corey Director April 23, 1996
- --------------------- ---------------
Michael J. Corey
Director
- --------------------- ---------------
Michael R. Ferrari
s/Peter D. Fullam Director April 23, 1996
- --------------------- ---------------
Peter D. Fullam
s/Stephan M. Largent President and Director April 26, 1996
- --------------------- ---------------
Stephan M. Largent
s/T. David Kingston Director April 23, 1996
- --------------------- ---------------
T. David Kingston
Director
- --------------------- ---------------
Jeff S. Liebman
Director
- --------------------- ---------------
Kenneth R. Meyer
Director
- --------------------- ---------------
Phillip R. O'Connor
s/Norman A. Fair Director April 24, 1996
- --------------------- ---------------
Norman A. Fair
s/Thomas K. Neavins Director April 24, 1996
- --------------------- ---------------
Thomas K. Neavins
s/Mark E. Reynolds Vice President and Treasurer April 25, 1996
- --------------------- ---------------
Mark E. Reynolds
75
<PAGE>
INDEX TO EXHIBITS
Exhibit
EX-99.B10. Consent of Ernst & Young LLP
EX-99.B13. Calculation of Performance Information
EX-27. Financial Data Schedule
82
We consent to the reference to our firm under the caption "Independent Auditors"
in the Statement of Additional Information and to the use of our reports dated
January 25, 1996, with respect to the financial statements of First Variable
Life Insurance Company - First Variable Annuity Fund E and the statutory-basis
financial statements of First Variable Life Insurance Company included in this
Post-Effective Amendment No. 8 to the Registration Statement (Form N-4,
No. 33-35749).
s/Ernst & Young LLP
-----------------
ERNST & YOUNG LLP
Boston, Massachusetts
April 24, 1996
FIRST VARIABLE ANNUITY FUND E
CALCULATION OF PERFORMANCE INFORMATION
Cash Management Direct Fund E Yield Calculations as of 12/31/95
Seven Day Yield
12/29/95 Unit Price 11.666 (A)
12/22/95 Unit Price 11.654 (B)
Difference 0.012 (C)
Base Return (C) / (B) 0.001029689
Annualized Base Return = (C) / (B) * 365/7 5.37%
=
Total Return = (1+Base Return) ^ (365/7) 5.51%
-1 =
Total Return on Direct Portfolios over respective periods Formula P*(1+T) ^ N
= ERV T = ((ERV/P) ^ 1/N) -1
Policy Issue Fee 0
Ann Contract Mnt Chg
30.00
Time Since Start
5.40
Time Since Start SC &
GI
0.58
Surrendar Charge 1 7
Surrender Charge 2 6
Surrender Charge 3 5
Surrender Charge 4 4
Surrender Charge 5 3
Surrender Charge 6 0
<TABLE>
<CAPTION>
CASH MANAGEMENT
ONE YEAR FIVE YEARS START OF PORTFOLIO
<S> <C> <C> <C> <C> <C>
Unit Price EOP 11.666213 Unit Price EOP 11.666213 Unit Price EOP 11.666213
Unit Price BOP 11.220155 Unit Price BOP 10.239436 Unit Price BOP 10
Accum Value EOP Accum Value EOP Accum Value EOP
1,139.34 1,166.62
1,039.76
Surrender Charge Surrender Charge Surrender Charge
- -
63.00
Ann Contract Charge Ann Contract Charge Ann Contract
150.00 Charge 150.00
30.00
Surrender Value Surrender Value Surrender Value
989.34 1,016.62
946.76
Total Return -5.324% Total Return -0.214% Total Return 0.306%
COMMON STOCK
ONE YEAR FIVE YEARS START OF PORTFOLIO
Unit Price EOP 17.053582 Unit Price EOP 17.053582 Unit Price EOP 17.053582
Unit Price BOP 12.611557 Unit Price BOP 9.929411 Unit Price BOP 10
Accum Value EOP Accum Value EOP Accum Value EOP
1,717.48 1,705.36
1,352.22
Surrender Charge Surrender Charge Surrender Charge
- -
63.00
Ann Contract Charge Ann Contract Charge Ann Contract
150.00 Charge 150.00
30.00
Surrender Value Surrender Value Surrender Value
1,567.48 1,555.36
1,259.22
Total Return 25.922% Total Return 9.406% Total Return 8.524%
MULTIPLE STRATEGIES
ONE YEAR FIVE YEARS START OF PORTFOLIO
Unit Price EOP 17.322152 Unit Price EOP 17.322152 Unit Price EOP 17.322152
Unit Price BOP 13.283444 Unit Price BOP 10.343143 Unit Price BOP 10.000000
Accum Value EOP Accum Value EOP Accum Value EOP
1,674.75 1,732.22
1,304.04
Surrender Charge Surrender Charge Surrender Charge
- -
63.00
Ann Contract Charge Ann Contract Charge Ann Contract
150.00 Charge 150.00
30.00
Surrender Value Surrender Value Surrender Value
1,211.04 1,524.75 1,582.22
Total Return 21.104% Total Return 8.803% Total Return 8.868%
U.S. GOVERNMENT BOND
ONE YEAR FIVE YEARS START OF PORTFOLIO
Unit Price EOP 15.320315 Unit Price EOP 15.320315 Unit Price EOP 15.320315
Unit Price BOP 12.927039 Unit Price BOP 10.556043 Unit Price BOP 10.000000
Accum Value EOP Accum Value EOP Accum Value EOP
1,185.14 1,451.33 1,532.03
Surrender Charge Surrender Charge Surrender Charge
63.00 - -
Ann Contract Charge Ann Contract Charge Ann Contract
150.00 Charge 150.00
30.00
Surrender Value Surrender Value Surrender Value
1,301.33 1,382.03
1,092.14
Total Return 9.214% Total Return 5.409% Total Return 6.175%
HIGH INCOME BOND
ONE YEAR FIVE YEARS START OF PORTFOLIO
Unit Price EOP 16.255804 Unit Price EOP 16.255804 Unit Price EOP 16.255804
Unit Price BOP 13.854759 Unit Price BOP 9.338508 Unit Price BOP 10.000000
Accum Value EOP Accum Value EOP Accum Value EOP
1,740.73 1,625.58
1,173.30
Surrender Charge Surrender Charge Surrender Charge
- -
63.00
Ann Contract Charge Ann Contract Charge Ann Contract
150.00 Charge 150.00
30.00
Surrender Value Surrender Value Surrender Value
1,590.73 1,475.58
1,080.30
Total Return 8.030% Total Return 9.728% Total Return 7.471%
TILT UTILITY
ONE YEAR FIVE YEARS START OF PORTFOLIO
Unit Price EOP 19.337872 Unit Price EOP 19.337872 Unit Price EOP 19.337872
Unit Price BOP 14.694342 Unit Price BOP 10.152656 Unit Price BOP 10.000000
Accum Value EOP Accum Value EOP Accum Value EOP
1,904.71 1,933.79
1,316.01
Surrender Charge Surrender Charge Surrender Charge
- -
63.00
Ann Contract Charge Ann Contract Charge Ann Contract
150.00 Charge 150.00
30.00
Surrender Value Surrender Value Surrender Value
1,754.71 1,783.79
1,223.01
Total Return 22.301% Total Return 11.903% Total Return 11.313%
WORLD EQUITY
ONE YEAR FIVE YEARS START OF PORTFOLIO
Unit Price EOP 14.673869 Unit Price EOP 14.673869 Unit Price EOP 14.673869
Unit Price BOP 11.969388 Unit Price BOP 9.213870 Unit Price BOP 10.000000
Accum Value EOP Accum Value EOP Accum Value EOP
1,592.58 1,467.39
1,225.95
Surrender Charge Surrender Charge Surrender Charge
- -
63.00
Ann Contract Charge Ann Contract Charge Ann Contract
150.00 Charge 150.00
30.00
Surrender Value Surrender Value Surrender Value
1,442.58 1,317.39
1,132.95
Total Return 13.295% Total Return 7.604% Total Return 5.237%
SMALL CAP
ONE YEAR START OF PORTFOLIO
Unit Price EOP 12.931102 Unit Price EOP 12.931102
Unit Price BOP 10 Unit Price BOP 10.000000
Accum Value EOP Accum Value EOP
1,293.11
1,293.11
Surrender Charge Surrender Charge
63.00
63.00
Ann Contract Charge Ann Contract
Charge 30.00
30.00
Surrender Value Surrender Value
1,200.11
1,200.11
Total Return 36.958% Total Return 36.958%
GROWTH & INCOME
ONE YEAR START OF PORTFOLIO
Unit Price EOP 11.217986 Unit Price EOP 11.217986
Unit Price BOP 10 Unit Price BOP 10.000000
Accum Value EOP Accum Value EOP
1,121.80
1,121.80
Surrender Charge Surrender Charge
63.00
63.00
Ann Contract Charge Ann Contract
Charge 30.00
30.00
Surrender Value Surrender Value
1,028.80
1,028.80
Total Return 5.017% Total Return 5.017%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> Cash Management Division
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 8,280,967
<INVESTMENTS-AT-VALUE> 8,280,967
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,280,967
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20
<TOTAL-LIABILITIES> 20
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 8,280,967
<SHARES-COMMON-PRIOR> 6,240,457
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 8,280,947
<DIVIDEND-INCOME> 423,306
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 101,549
<NET-INVESTMENT-INCOME> 321,757
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 321,757
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,759,243
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> U.S. Government Bond Division
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 8,054,655
<INVESTMENTS-AT-VALUE> 8,065,649
<RECEIVABLES> 7,941
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,073,590
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 767,443
<SHARES-COMMON-PRIOR> 974,012
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 8,073,590
<DIVIDEND-INCOME> 801,191
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 105,942
<NET-INVESTMENT-INCOME> 695,249
<REALIZED-GAINS-CURRENT> (433,224)
<APPREC-INCREASE-CURRENT> 1,155,615
<NET-CHANGE-FROM-OPS> 1,417,640
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,391,387)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> High Income Bond Division
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 7,646,057
<INVESTMENTS-AT-VALUE> 7,573,144
<RECEIVABLES> 1,800
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,574,944
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 881,679
<SHARES-COMMON-PRIOR> 695,555
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 7,574,944
<DIVIDEND-INCOME> 663,543
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 89,274
<NET-INVESTMENT-INCOME> 574,269
<REALIZED-GAINS-CURRENT> (325,633)
<APPREC-INCREASE-CURRENT> 763,785
<NET-CHANGE-FROM-OPS> 1,012,421
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,070,654
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> Common Stock Division
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 13,978,802
<INVESTMENTS-AT-VALUE> 15,946,892
<RECEIVABLES> 1,628
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,948,520
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 616,518
<SHARES-COMMON-PRIOR> 465,420
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 15,948,520
<DIVIDEND-INCOME> 931,729
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 166,780
<NET-INVESTMENT-INCOME> 764,949
<REALIZED-GAINS-CURRENT> 892,623
<APPREC-INCREASE-CURRENT> 2,078,887
<NET-CHANGE-FROM-OPS> 3,736,459
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,629,201
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> Multiple Strategies Division
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 20,361,577
<INVESTMENTS-AT-VALUE> 21,611,312
<RECEIVABLES> 2,905
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,614,217
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,794,562
<SHARES-COMMON-PRIOR> 1,586,437
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 21,614,217
<DIVIDEND-INCOME> 1,954,586
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 245,887
<NET-INVESTMENT-INCOME> 1,708,699
<REALIZED-GAINS-CURRENT> (363,483)
<APPREC-INCREASE-CURRENT> 3,447,663
<NET-CHANGE-FROM-OPS> 4,792,879
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,714,612
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> Tilt Utility Division
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 12,117,345
<INVESTMENTS-AT-VALUE> 13,445,900
<RECEIVABLES> 672
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,446,572
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 856,190
<SHARES-COMMON-PRIOR> 746,115
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 13,446,572
<DIVIDEND-INCOME> 640,595
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 149,482
<NET-INVESTMENT-INCOME> 491,113
<REALIZED-GAINS-CURRENT> (510,575)
<APPREC-INCREASE-CURRENT> 3,134,928
<NET-CHANGE-FROM-OPS> 3,115,466
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,215,935
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> World Equity Division
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 14,167,180
<INVESTMENTS-AT-VALUE> 15,277,389
<RECEIVABLES> 1,530
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,278,919
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,107,497
<SHARES-COMMON-PRIOR> 721,908
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 15,278,919
<DIVIDEND-INCOME> 844,123
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 161,354
<NET-INVESTMENT-INCOME> 682,769
<REALIZED-GAINS-CURRENT> 651,108
<APPREC-INCREASE-CURRENT> 1,181,856
<NET-CHANGE-FROM-OPS> 2,515,733
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,794,844
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> Growth and Income Division
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 3,290,382
<INVESTMENTS-AT-VALUE> 3,334,758
<RECEIVABLES> 177
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,334,935
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 298,528
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,334,935
<DIVIDEND-INCOME> 40,732
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 12,583
<NET-INVESTMENT-INCOME> 28,149
<REALIZED-GAINS-CURRENT> 13,164
<APPREC-INCREASE-CURRENT> 44,376
<NET-CHANGE-FROM-OPS> 85,689
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,334,935
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> Small Cap Division
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 3,739,728
<INVESTMENTS-AT-VALUE> 3,811,518
<RECEIVABLES> 965
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,812,483
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 301,624
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,812,483
<DIVIDEND-INCOME> 98,803
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 13,686
<NET-INVESTMENT-INCOME> 85,117
<REALIZED-GAINS-CURRENT> 123,359
<APPREC-INCREASE-CURRENT> 71,790
<NET-CHANGE-FROM-OPS> 280,266
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,812,483
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
